Blockchain digital currency: systems and methods for use in enterprise blockchain banking

ABSTRACT

Methods and systems for using blockchain digital currency are provided herein. The methods and systems comprise a blockchain digital currency that is created and utilized on a permission-based network of financial institutions. The blockchain digital currency is created by a central authority and minted into circulation by banks within the network, and is backed by reserves of real world currency of any country. The digital currency can be used for any type of financial transaction, and the system provides security, trust, traceability and a detailed audit trail for all transactions.

BACKGROUND Field of the Invention

This relates generally to blockchain digital currencies and systems andmethods for their use. More particularly, this relates to virtual ‘fiat’blockchain currency that is centrally issued and controlled, and systemsand methods for private, permissioned blockchain financial systems thatco-exist with and work seamlessly with any real-world currency, andwhich can utilize ‘smart’ electronic contracts among parties to thesystem.

Description of Related Art

Traditional currencies included coins having intrinsic value (e.g. gold,silver, and copper). Paper currency was traditionally issued bycentralized issuers and was backed by reserves having intrinsic value(e.g. the ‘gold standard’). In the 20^(th) century, the modern centralbanking system was developed and most official currencies were removedfrom the gold standard and/or backed by a fractional reserve system.Such “fiat money” was controlled by the central banks that issued it.

Over the years, various private parties have developed various privatecurrencies, scrip, coupons, and such as alternatives to officialcurrencies. However these were only available for limited purposes andtheir distribution was also limited. Since the widespread availabilityof the Internet and the worldwide web, some of these were effectivelymade available as ‘virtual’ currencies, but they still had very limitedor specific uses and distribution.

In the last decade or so, digital currencies and cryptocurrencies, haveemerged. Some of these currencies have had appeal for a number ofreasons including their potential for privacy, security (provided viadigital footprint), and independence from central banks and governments.And while they do not have intrinsic value—they can offer resistance toarbitrary inflation. These digital currencies represent an electronicstore of value that have lately become a growing alternative totraditional real world currencies. Among the most popular or well-knowndigital currencies is BITCOIN™ (‘BTC’), however there are at presenthundreds of cryptocurrencies that have been developed over the lastdecade.

These currencies and transactions that are based on them can be securedby information that is kept/recorded in a database called a blockchain,which provides a verifiable ‘public ledger’. The security includes e.g.a timestamp for each event and a digital hashtag to ensure integrity ofthe blockchain. The information can include details about the currencyand specifics about its transfer from e.g. a payer to a payee. Theblockchain database typically includes a distributed or peer-to peerfeature, with a plurality of nodes on a network to validate and recordtransactions, and verify any modifications to the blockchain, where arein turn shared and validated independently to ensure and verify theownership of currency.

Because of several, if not all of the foregoing features, suchcryptocurrencies have often been attractive to criminal elements, andresisted by or repugnant to governments and central banks. Transactionsthat provide anonymity and such ease of transfer can avoid any oversightor control, by-pass the banking system and laws, and avoid taxation.

Notwithstanding these concerns, because of their rising popularity, inthe last few years many businesses, including many online andtraditional retailers have begun accepting e.g. BITCOIN for sometransactions. Some banks and non-bank financial services companies beganproviding or enabling exchange and services. The tide continues to turnand governments, banks, and other non-bank financial services haverealized that they too may be able to take advantage of many of thefeatures of such currencies in the right circumstances.

Existing cryptocurrencies are generally decentralized. Rather than beingminted or created by a central bank and based on a reserve or fractionalreserve, new cryptocurrency ‘coins’ or ‘tokens’ are typically creatingby a process called mining which involves searching, e.g. for specificsolutions to a complex mathematical formulation, or numbers meetingspecified criteria, typically of increasing complexity. Each solutiondiscovered represents a unique ‘coin’ or ‘token’ of value and thatunique information helps to identify the currency in the blockchain. Thenature of this method of currency creation means anyone with sufficientcomputing power can create new currency—which has an inflationary effect(albeit one that is controlled by the rate at which new solutions can befound or ‘mined’ and/or the maximum number of solutions that exist forany given cryptocurrency). Moreover, most existing cryptocurrencies arenot readily converted to cash, or exchanged in the various foreignexchanges, but banks and non-bank financial services firms are graduallyadapting (see above).

While currency mining creates opportunities for independent/privatebusinesses, it effectively cuts out the financial institutions. Inaddition, because of the completely decentralized creation process, thesecurity of the cryptocurrency itself is to a greater or lesser extentoffset or put at risk by the vulnerability of miners, digital exchanges,and other parties to malevolent electronic activities. Manipulations,security breaches, and financial misdeeds of significant proportionshave been reported in these unregulated cryptocurrencies.

In addition to the foregoing, governments have begun to publiclyrecognize certain limitations to traditional physical currencies, notlimited to the expenses of printing, minting, maintaining, andcirculating such currencies, providing equal access to all to thecurrency and banking systems, and collecting taxes from unreportedtransactions (e.g. unreported transactions, and underground economyincluding ‘under the table’ paid work, as well illicit activities).

The existence of a large ‘unbanked’ population that does not participatein conventional banking results from a variety of reasons including thelack of available banking services in unserved or underservedcommunities. This unbanked culture creates multi-faceted problems,including an ‘underground’ cash economy, and a disparate economicreality for people who are excluded from the system.

In order to overcome some of the challenges or shortcomings oftraditional physical currencies (including providing improved access tothe unbanked), proposals are being made to consider use ofcryptocurrencies, or to create and test their own cryptocurrencies.Several jurisdictions, including India and the European Union arelooking at proposals for actually going ‘cashless’. Still more recently,tremendous volatility in the cryptocurrency markets and spectaculargains and losses by cryptocurrency ‘investors’, as well as stories ofunscrupulous tactics by those promoting certain Initial Coin Offerings(ICOs), or ‘pump and dump’ schemes has prompted still more governmentsand central banks to consider methods for regulating these products toprotect consumers. A more robust and centralized blockchain-baseddigital currency system may be needed.

Thus, while it is clear that we may be on the cusp of a massive culturalchange, to date, there have been no truly workable cryptocurrencysystems that enable central creation and control of a digital currencythat includes many of the advantages and benefits of blockchain digitalcurrencies while allowing control (by financial institutions, centralauthorities (including central banks), or governments (throughregulation and the like) over e.g., the value of the currency, thereserve requirements and other regulations for participating financialinstitutions, and the minting of new currency in accordance with setrules. Unlike prior art systems, such systems could work seamlessly withreal world currencies and allow instant conversion from and to anytraditional real world currency. Ideally such a digital currency systemwould allow exchange of digital currencies into different “fiat” realworld currencies through a virtual foreign exchange similar to howcurrencies are currently exchanged around the world.

There is therefore a need for new and improved systems comprisingcentralized blockchain digital currencies established by centralauthorities and financial institutions, and methods for using thesesystems and currencies for business transactions in a secure andconvenient environment.

SUMMARY

Novel systems and methods for a blockchain digital currency inconnection with an entire financial system that includes a centralauthority, a plurality of financial institutions of which at least oneor more are banks, and that works in conjunction with traditional realworld currencies.

In a first of its several aspects, this disclosure provides privatepermissioned systems using blockchain digital fiat currencies that areestablished and controlled by agreement of a group of financialinstitutions who are authorized to ‘mint’ or circulate electronicrepresentations of real world currency useful in a variety of financialtransactions including but not limited to consumer-to-consumer (“C2C”),consumer-to-business (“C2B”), business-to-consumer (“B2C”), andbusiness-to-business (“B2B”).

The systems thus generally comprise:

-   -   a) a plurality of electronic tokens representing blockchain        digital currency that is out of circulation in the system        (“out-of-circulation tokens”), each such token comprising a        blockchain including an out-of-circulation block comprising a        plurality of the following data:        -   1) a real world currency ID key;        -   2) a null issuing financial institute (FI) key;        -   3) a null issue timestamp;        -   4) a null party name ID;        -   5) a null party account ID;        -   6) a null party ‘transfer to’ timestamp; and        -   7) a value key equal to zero;    -   b) one or more unique digital security features on each        out-of-circulation token to provide security and traceability,        and to ensure authenticity for that token;    -   c) a plurality of electronic tokens for blockchain digital fiat        currency that is in circulation in the system (“in-circulation        digital currency”), each such token comprising a blockchain        including the out-of-circulation block and further comprising an        “in-circulation” block comprising a plurality of the following        data:        -   1) a real world currency ID key;        -   2) an issuing financial institute (FI) key;        -   3) an issue timestamp;        -   4) a party name ID;        -   5) a party account ID;        -   6) a party ‘transfer to’ timestamp; and        -   7) a value key specifying the value of the token expressed            as the number of “minimal physical currency units” in            circulation for the corresponding real world currency;    -   d) a plurality of participating financial institutions;    -   e) for each participating financial institution that is a        qualified bank, a public/private mint key pair that allows the        bank to digitally mint in-circulation digital currency by        modifying the blockchain of out-of-circulation tokens by        appending an in-circulation block thereto notwithstanding the        unique digital security features thereon;    -   f) a central authority that creates and issues the        out-of-circulation tokens, creates and implements the digital        security features thereon, establishes permissions for parties        to the system, and issues public/private mint key pairs for        qualified banks, and public/private decryption key pairs to        parties in accordance with their permissions;    -   g) a plurality of private servers, each comprising:        -   1) non-volatile computer memory storing:            -   i) one or more distributed databases comprising:                -   (a) the out-of-circulation tokens; and                -   (b) the in-circulation digital currency in the                    system;            -   ii) computer readable instructions sufficient to limit                access to the blockchains for out-of-circulation tokens                to public/private mint key holders, to allow said key                holder to append an in-circulation block to the keychain                to digitally mint in-circulation digital currency;            -   iii) computer readable instructions sufficient to allow                the blockchains of in-circulation digital currency                tokens to only be modified by public/private decryption                key holders with sufficient permissions, and to append                new blocks to said blockchains;            -   iv) computer readable instructions sufficient to                accurately store each blockchain so modified in the                databases;            -   v) computer readable instructions sufficient to create                and store a unique timestamp corresponding to each such                blockchain modification; and        -   2) one or more processors capable of executing the computer            readable instructions; and    -   h) a network comprising connections between the private servers        including means for distributing the databases between the        servers comprising private peer-to-peer connections, or other        private permissioned connections, or an electronic portal for        accessing said databases; such that the out-of-circulation        tokens and the in-circulation digital currency tokens are        preferably only accessible to the financial institutions having        permission;    -   wherein the out-of-circulation tokens are created by fiat and        not mined.

In various embodiments, the participating financial institutionscomprise qualified banks and other (nonbank) financial servicescompanies. In one embodiment, the financial institutions have their ownvirtual accounts and can hold minted in-circulation digital currency intheir own virtual accounts.

In presently preferred embodiments the systems further comprise reservedfunds in real world currency, which are provided by a qualified bank inproportion to the amount of in-circulation digital currency that isdigitally minted by the bank from out-of-circulation tokens. The amountof such reserves can be determined by the initial agreement between e.g.the financial institutions, or between a central authority and thefinancial institutions. In one embodiment, the financial institutionsand the central authority will determine the reserve requirements andother requirements of the system. Where the central authority is acentral bank, its authority may be specific to currency controlled bythat central bank. Government regulations, banking industry standards,and consumer attitudes may all factor into the nature and amount of suchreserve funds in real world currency, as well as the specific manner inwhich they are held, and when and how they are released whenin-circulation currency is redeemed. In one embodiment the total amountof in-circulation digital currency in the system is equal to the totalreserved funds in real world currency held by the banks. In otherembodiments, the reserves may be a fraction of the in-circulationcurrency.

The systems further comprise a plurality of virtual bank accounts,virtual credit accounts, and virtual foreign exchange accounts invarious embodiments. Each such account is associated with a party who isa specific account holder that is a customer or consumer; a vendor, amerchant, a lender, or a borrower; or any combination thereof.Generally, each account holder has at least one account that is avirtual bank account, a virtual credit account, or a virtual foreignexchange account. As described above, the financial institutions havetheir own virtual accounts in some embodiments. Such accounts may berequired for some or all participating financial institutions.

In a second of its several aspects, this disclosure provides methods forimplementing a private permissioned blockchain digital fiat currency.The methods generally comprise the steps of:

-   -   a) establishing a central authority to issue a plurality of        electronic tokens representing blockchain digital currency that        is out of circulation in the system (“out-of-circulation        tokens”), each such token comprising a blockchain; wherein the        blockchain for each token includes an “out-of-circulation” block        comprising a plurality of the following data:        -   1) a real world currency ID key;        -   2) a null issuing financial institute (FI) key;        -   3) a null issue timestamp;        -   4) a null party name ID;        -   5) a null party account ID;        -   6) a null party ‘transfer to’ timestamp; and        -   7) a value key wherein the quantity is zero;    -   b) including one or more unique digital security features        generated by the central authority on each out-of-circulation        token to provide security and traceability, and to ensure        authenticity for that token;    -   c) recruiting a plurality of financial institutions to become        parties by mutual agreement to a private permissioned network in        connection with the digital fiat currency;    -   d) granting unique permissions to each of the financial        institutions to identify each such financial institution in the        system wherein each unique permission is granted by the central        authority;    -   e) for each participating financial institution that is a        qualified bank, generating, via the central authority, a unique        public/private mint key pair that allows the bank to digitally        mint in-circulation digital currency by modifying the blockchain        of out-of-circulation tokens by appending an in-circulation        block thereto notwithstanding the unique digital security        features thereon;    -   f) providing a plurality of private servers, each comprising:        -   1) non-volatile computer memory storing:            -   i) one or more distributed databases comprising:                -   (a) the out-of-circulation tokens; and                -   (b) the in-circulation digital currency in the                    system;            -   ii) computer readable instructions sufficient to limit                access to the blockchains for out-of-circulation tokens                to public/private mint key holders, to allow said key                holder to append an in-circulation block to the keychain                to digitally mint in-circulation digital currency;            -   iii) computer readable instructions sufficient to allow                the blockchains of in-circulation digital currency                tokens to only be modified by public/private decryption                key holders with sufficient permissions, and to append                new blocks to said blockchains;            -   iv) computer readable instructions sufficient to                accurately store each blockchain so modified in the                databases;            -   v) computer readable instructions sufficient to create                and store a unique timestamp corresponding to each such                blockchain modification; and        -   2) one or more processors capable of executing the computer            readable instructions;    -   g) establishing a network among the private servers;    -   h) creating connections between the private servers on the        network, including means for distributing the databases between        the servers, said connections comprising private peer-to-peer        connections, or other private permissioned connections, or an        electronic portal for accessing said databases; such that the        out-of-circulation tokens and in-circulation digital currency        are accessible only to the financial institutions having        permission to access said tokens;    -   i) for each bank electing to digitally mint an amount of        in-circulation digital currency:        -   1) reserving funds in proportion to the amount of            in-circulation digital currency the bank elects to digitally            mint;        -   2) digitally minting the amount of in-circulation digital            currency by modifying the blockchain for one or more            out-of-circulation tokens by appending thereto an            “in-circulation” block comprising a plurality of the            following data:            -   i) a real world currency ID key;            -   ii) an issuing financial institute (FI) key;            -   iii) an issue timestamp;            -   iv) a party name ID;            -   v) a party account ID;            -   vi) a party ‘transfer to’ timestamp; and            -   vii) a value key specifying the value of the token                expressed as the number of “minimal physical currency                units” in circulation for the corresponding real world                currency; and        -   3) repeating steps i(1) and i(2) each time the bank elects            to digitally mint an amount of in-circulation digital            currency;    -   j) permitting a party that is a financial institution, customer,        consumer, vendor, merchant with permission to use the        in-circulation digital currency in one or more transactions; and    -   k) recording the details of the transactions in one or more        blocks appended to the blockchain of the in-circulation digital        currency.

In yet another aspect, blockchain digital currencies are providedherein. These currencies, sometimes referred to herein as virtual fiatmoney (VFM) differ from other cryptocurrencies in several respects, andare similar to cryptocurrencies in other respects.

The blockchain digital currency are useful only within the context of aprivate, permissioned financial network. In general the blockchaindigital currencies comprise:

-   -   an electronic token having a blockchain;    -   at least one digital security feature to enhance security,        traceability, authenticity, or a combination thereof for that        token;    -   wherein if the currency is “out of circulation” in the private        financial network, the value of the token is zero and the        blockchain comprises an “out-of-circulation” block comprising a        plurality of the following data:    -   a) a real world currency ID key;    -   b) a null issuing financial institute (FI) key;    -   c) a null issue timestamp;    -   d) a null party name ID;    -   e) a null party account ID;    -   f) a null party ‘transfer to’ timestamp; and    -   g) a value key equal to zero;    -   wherein if the currency is “in circulation” in the private        financial network, the blockchain comprises an        out-of-circulation block and further includes an “in        circulation” block comprising a plurality of the following data:    -   a) a real world currency ID key;    -   b) an issuing financial institute (FI) key;    -   c) an issue timestamp;    -   d) a party name ID;    -   e) a party account ID;    -   f) a party ‘transfer to’ timestamp; and    -   g) a value key specifying the value of the token expressed as        the number of “minimal physical currency units” in circulation        for the corresponding real world currency; and    -   wherein if the currency is “in circulation” in the system, the        value indicated in the quantity key corresponds to an amount of        funds in real-world currency have been placed on reserve in the        system by a bank having permission to put the digital currency        into circulation in the system; and    -   wherein the private currency is created by fiat as        out-of-circulation tokens which cannot be “mined” or otherwise        created such as by finding solutions to an algorithm,        identifying complex numbers with particular properties, or the        like.

In another of its several aspects, private networks for peer-to-peerfinancial transactions are provided. The private networks generallycomprise a plurality of parties each having:

-   -   1) a unique identity within the network;    -   2) at least one virtual account in the private network; and    -   3) a digital signing key unique to that party for authorizing        peer-to-peer transactions.

The networks also comprise, for each peer-to-peer financial transaction,an electronic document comprising:

-   -   1) at least the core terms of the peer-to-peer financial        transactions;    -   2) a unique identifier for that transaction;    -   3) the identities of each party involved in the transaction;    -   4) an authorization approval section for the document that        requires use of the digital signing key unique to a party        authorizing the transaction; and    -   5) a timestamp corresponding to the time a party authorized the        transaction;

The private networks also have a plurality of networked serverscomprising at least one distributed database comprising electronictokens representing the blockchain digital currency as disclosed herein,and the electronic document for each peer-to-peer financial transaction.In addition, the networks comprise a payment module comprising computerinstructions capable of being executed on the network said instructionsfor transferring a specified amount of blockchain digital currency fromthe virtual account of a first party who authorizes a specifiedtransaction comprising payment of the specified amount of the blockchaindigital currency to the virtual account of a second party, uponauthorization of the specified transaction using the digital signingkey. In some embodiments, the first party can alternatively authorize athird party to make payment to the second party on behalf of the firstparty.

In various embodiments, the electronic document for each peer-to-peerfinancial transaction comprises a blockchain of data that providessecurity, traceability, and an audit trail for each transaction.Generally, if the authorization approval section for the electronicdocument for a transaction has been signed with the authorized key, thepayment module is executed. The execution is preferably automatic andirrevocable, and substantially simultaneous with the authorization.

In yet another of its several aspects electronic contracts, i.e. “smartcontracts” or “smart transactions” are provided herein. The smarttransactions can range from a basic invoice or other simple financialtransaction, to complete smart “agreements” that are negotiated and/orexecuted electronically and/or that have their payment obligations paide.g. at a pre-approved date/time, with blockchain digital currency inthe private systems disclosed herein.

Thus, methods are disclosed herein for transacting payments usingblockchain digital currency in a private permissioned financial system.The methods comprising the steps of:

-   -   a) identifying a first party requesting a payment in blockchain        digital currency in the system from a second party, and a second        party determining whether to make a payment of blockchain        digital currency to the first party;    -   b) ensuring that at least the first and second parties each hold        at least one virtual account in the system, and have a unique        identifier within the system;    -   c) providing each of the first and second parties with a digital        signing key unique to that party for authorizing or approving a        payment of digital currency in the system;    -   d) establishing electronic communications between the first and        second parties within or without the system to communicate        regarding a payment of digital currency within the system;    -   e) communicating an invoice or smart transaction from the first        party detailing the specified amount of payment of digital        currency requested;    -   f) recording the invoice or smart transaction in a database in        the system;    -   g) receiving the invoice or smart transaction by the second        party; and    -   h) processing the invoice or smart transaction by the second        party.

If the invoice or smart transaction is approved for payment; the methodfurther comprises signing the invoice or smart transaction in thedatabase with the digital signing key and authorizing payment; followedby transferring the specified amount of blockchain digital currency fromthe virtual account of the second party to the virtual account of thefirst party; and recording the details of the approval, authorization,and payment in the database.

In a further aspect full “smart” transactions are provided based on theforegoing method.

Systems and methods for practicing the foregoing related developmentsare provided through this disclosure.

These and/or further aspects, features, and advantages of the presentinvention will become apparent to those skilled in the art in view ofthis disclosure.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 : A diagrammatic overview of an embodiment of a hybrid systemfeaturing a private, permissioned blockchain digital fiat currency (VFM)used in conjunction with real world currencies.

FIG. 2 : A flowchart showing the steps of an embodiment of the method ofimplementing and using a private permissioned blockchain digital fiatcurrency.

FIG. 3 : A diagrammatic representation showing the electronic tokens forin-circulation digital currency as well as the out-of-circulationtokens, and the blockchain thereon.

FIG. 4 : A flowchart showing an embodiment of how a financialinstitution here fills a customer request for virtual fiat money in thesystem.

FIG. 5 : A flowchart showing aspects of how an alternative financialservices business (or nonbank financial institution) in the system thatcannot directly mint in-circulation VFM can nonetheless establish a VBAand acquire VFM in the system, and transact business using VFM.

FIG. 6 : A flowchart showing aspects of VFM redemption for non-financialinstitutions (e.g. vendors and merchants) within the system.

FIG. 7 : A flowchart showing aspects of VFM redemption for e.g.customers and consumers with in the system.

FIG. 8 : A flowchart showing basic principles of clearing VFM amongfinancial institutions in the system that are banks, showing anembodiment of first minted (oldest), first cleared approach to clearingVFM.

DETAILED DESCRIPTION

Provided herein are systems and methods for using digital blockchaincurrencies in conjunction with real world currencies, and a noveldigital blockchain currency that can be conveniently incorporated into anew network of financial institutions as well as into an existingstructure of central banking authorities and member banks. The systemsand methods generally utilize a private permissioned network offinancial institutions and utilize a digital blockchain fiat currencythat is backed by a real-world currency. The systems and methods providea wide range of functionality—more functionality than prior digitalcurrencies—through the system, including via the use of e.g. multipleAPI each of which provides further utility. Smart payments, includingpayments for invoices, contracts and other request for payments(generally “smart transactions” as defined herein) are also utilized inseveral of the systems and methods.

Definitions & Abbreviations

Unless expressly defined otherwise, all technical and scientific terms,terms of art, and acronyms used herein have the meanings commonlyunderstood by one of ordinary skill in the art in the field(s) of theinvention, or in the field(s) where the term is used. In accordance withthis description, the following abbreviations and definitions apply.

Abbreviations

The following abbreviations apply unless indicated otherwise:

-   -   ACH automated clearing house;    -   API application programming interface;    -   ATM automated teller machine;    -   CPU central processing unit/processor;    -   EDI electronic data interchange;    -   EFT electronic funds transfer;    -   FI financial institution;    -   ID identifier; identity;    -   IoT Internet of Things;    -   IOU an “I owe you”; i.e. a document acknowledging a debt;    -   ISO International Organization for Standardization;    -   JSON JavaScript Object Notation;    -   NBFI non-bank financial institution (or alternative financial        services)    -   P2P peer-to-peer;    -   RAM random access memory;    -   ROM read-only memory;    -   RWC real world currency;    -   VBA virtual bank account;    -   VCA virtual credit account;    -   VFM virtual fiat money;    -   VFX virtual foreign exchange account;    -   WAN wide area network; and    -   XML extensible markup language

Definitions

“Currency” as used herein means any money that is used as a store ofvalue and medium of exchange in a particular nation, or between nationswhether issued as notes or coins. Well-known examples include but arenot limited to the following Australian dollar, Brazilian real, Britishpound Sterling, Canadian dollar, Chinese yuan, European euro, Hong Kongdollar, Indian rupee, Japanese yen, Mexican peso, Russian ruble,Singapore dollar, South African rand, Swiss franc, and the U.S. dollar.In general, currency herein includes money that can be used as legaltender for payments. Currencies may typically be assigned value by fiator by backing by a particular commodity (e.g. gold, silver, platinum, orother valuable commodity). In certain cases a currency may be specificto a particular merchant or vendor or a group of merchants or vendors(e.g. a group with a commonality such as a geolocation, (e.g. local town‘bucks’) or a common industry organization, or the like). Suchmerchant-specific or merchant-issued ‘currencies’ may be backed bysomething of relative value such as goods or services offered by aspecific merchant/vendor, or group of merchants/vendors. In other cases,other merchants or vendors may accept such ‘currencies’ by arrangementwith the issuer. Examples might include ‘points’ issued by credit cardcompanies, or frequent-customer rewards, or even ‘cash-back’ points.

“Fiat” as used herein means ‘by agreement or internal rule’. The valueof fiat money or currency is typically set via a governmental law, rule,regulation, or decree. The value of such currency can likewise bechanged by law, rule, regulation, or decree. Moreover the supply of fiatmoney can be altered by adjusting the amount in circulation. Suchchanges can result in inflationary or deflationary effects on economiesusing the fiat money, and in today's world, those changes are typicallycarefully managed controlled by central banks established for suchpurposes. Reliable fiat currencies are guaranteed by the issuer (i.e.the government). Loss of the guarantee, or loss of credit-worthiness ofthe government, or faith in the ability of the government to back thecurrency can result in collapse of the currency or hyperinflation. Incontrast to fiat money, commodity-based money is backed in whole or partby a commodity whose value is readily determined, e.g. by its price onan open market. The value of commodity currencies can be pegged to thevalue of the commodity directly or e.g. via a mathematical formula. Thevalue can thus fluctuate along with the market price of the commodity.In a pure commodity money system, any paper money that is in circulationwill be fully backed by the commodity and historically paper money wasfreely exchangeable for e.g. gold (the “gold standard”). A coin in acommodity system is worth the face value on the coin, or has evengreater value as the underlying metal from which it is made (e.g. goldor silver). A coin whose face value is not supported at least by thevalue of the metal from which it is made is fiat money. Thus,hyperinflation is nearly impossible in a gold-backed currency, becausethe commodity itself has underlying value. For purposes herein, thedigital blockchain currency is a fiat electronic currency by virtue ofthe fact that it's value is linked by mutual agreement to a real-worldcurrency. This currency may be referred to herein as “VFM.” In contrast,the real-world currency referenced and represented by the digitalblockchain currency may be either a fiat currency or a commodity-backedcurrency. Thus, any requirement that the digital currency herein be afiat currency is not dependent on the type or nature of the underlyingreal-world currency. For the sake of clarity, a digital currency that iscreated in accordance with the system and methods disclosed herein maystill be referred to as a fiat currency or VFM, even if it represents oris backed by a reserve (e.g. a partial or fractional reserve) ofcommodity or commodity-based currency.

As used herein, the term “blockchain” references any distributedledger-type database comprising data (generally in blocks) about thefile with which the data entries are associated. The database thatcomprises the blockchain is generally distributed among servers on anetwork. Here, the blockchain database is distributed among the serversof a private network of financial institutes and/or other parties thatare part of the system. Distribution may be by peer-to-peer or otherconnections that provide access to, or duplication/replication of thedatabase. The databases can be distributed by any means amongst theservers provided that the distributed database is sufficiently secure.Ideally, the method of distributing the databases selected will providesubstantial security such that integrity of the database of blockchainsis ensured; i.e. such that no party, including the central authority, iscapable of modifying the database comprising the blockchains withoutknowledge of other parties who have true copies of the database.Preferably the servers in the network are updated in real time ornear-real time for all changes made at any/from any of the servers.Methods of such distribution are known in the art. As used herein theblockchain records are immutable, as defined below. All changes to theblockchain database constitute new blocks on the blockchain, entries tothe database, and are merely appended to the existing chain toeffectively create a digital ledger of all changes to the database. Thedigital ledger is useful in that it provides proof sufficient to auditthe history of the file with which the data are associated—from itscreation to the moment it is viewed. Certain data in the blockchain areentered automatically—such as the identity of/access credentials for theparty modifying the blockchain; and a timestamp indicating e.g. the dateand time of any new blocks (i.e. modifications to the database). Otheruseful security features can include e.g., a digital hashtag to improvesecurity by allowing authenticity to be digitally confirmed.

As used herein, “central authority” means a person, an entity, or agroup of entities that has the ability and authority to issue digitalcurrency in connection with the systems and methods disclosed herein. Invarious embodiments the central authority may be a private entityissuing currency to be used within a private system, such as a privatepermission-based network. In other embodiments herein, the centralauthority may be a central bank, or a governmental authority issuingdigital currency for a country or a geographic or geopolitical region. Acentral authority hereunder can also be an entity such as a merchant ora bank or a private network that issues a private ‘digital currency’ forits customers, or members or the like.

“Monetary policy” (aka “money policy”) is any policy implemented byagreement among the permissioned policy or by decree by a centralauthority (such as a central bank) designed or intended to e.g. ease ortighten money supply, control inflation or deflation, deflate aperceived bubble in any class of assets or investments, stimulate orslow an overall economy or economic system, or the like. Typically,monetary policy for e.g. a country, would be dictated by governmental orquasi-governmental agency or board and implemented via e.g. a centralbank.

As used herein, “immutable” means that all prior ‘blocks’ on the chains(e.g. data entries, records, party IDs, timestamps, and the like) cannotbe altered or modified by a party without permission. In general, thereis no reason to ever alter or modify a prior block entry and no party ispermitted to do so. The database itself can be “modified” by appendingnew data (e.g. blocks) to the chain. Preferably the blockchain isencrypted (e.g. via a public (or shared/group) key) and can be viewedonly by parties with “read” permission, and modified by only partieswith “write” permission. In general modifications to the blockchainrequire a private key that specifically identifies the modifying party.In other words each new block on the chain is appended to the chain by aspecific party who has permission to make the modification and thedetails of the modification (e.g. the time of such modification, theparty making the change) are recorded along with the data entered in anynewly appended block. Each party that has such a private key is limitedwith respect to the permissions granted that key. Keys and thepermissions that are provided thereby may be revoked or inactivated atany time and the central authority and/or the network of financialinstitutions generally will establish rules and authority for securelymanaging keys in the system/network as well as procedures governingrevocation of permissions and issued keys.

“Out-of-circulation” refers to the state of an electronic file or tokenthat has been created and includes an intact blockchain, but which hasnot been placed into circulation in the system. In contrast toout-of-circulation currency, currency is “in-circulation” by a processof ‘digital minting’ or creation when a participating financialinstitution that is a bank having permission to do so, modifies theblockchain of an out-of-circulation digital token by appending a newblock which assigns, e.g., a real world currency and value to the token.The bank will generally place a corresponding amount of real worldcurrency into an appropriate reserve account to back the digital‘minting’ process. “Removal of digital currency from circulation” meansremoving some portion or all of a given amount of in-circulation digitalcurrency and returning it to out-of-circulation digital currency. Theblockchain would of course be modified to indicate the date on which theparticular digital currency token was removed from circulation. Theremoval from circulation may be accompanied by the bank reclaiming orremoving any real world currency placed in reserve in connection withthe minting of the digital currency being removed from circulation.

As used herein, a “financial institution” means any business that isdeemed by the parties to the system to be a financial institution, suchas qualified banks (investment banks, commercial banks, savings andloans, and the like), credit loan companies, bill payment companies,money transfer companies, check cashing companies, gift card and storedvalue account companies, brokerages, investment companies, trusts,investment management companies, insurance companies, foreign exchangecompanies, credit card companies, and the like. In various embodiments,these financial institutions are duly authorized to operate inaccordance with local/national banking laws and other applicable lawswhere they are located and operating; i.e. they are registered,licensed, or the like as may be required.

As used herein “qualified bank” means a central bank, commercial bank,savings and loan, credit union, or other such bank or organization thatcan accept deposits from customers and/or which can provide security forthose deposits via reserves or guarantees. Preferably, qualified banksas used herein are duly authorized to operate in accordance withlocal/national banking and other applicable laws where they are locatedand operating; i.e. they are registered, licensed, or the like as may berequired. Preferably qualified banks herein have and satisfy applicablereserve requirements with respect to the deposits that have beenentrusted to them. In some cases, qualified banks are distinguished fromother financial institutions, which may be described variously as‘non-bank financial services institutions’ or ‘non-bank financialservices’ or the like.

“Internet” means the publicly accessible network commonly known as theInternet, including any protocols used for transmitting data packetsthereon. A “similar network” means any public, private, orpublic/private network, whether or not connected to the public Internet,which uses similar principles of operation or architecture, or similarprotocols. In particular, networks that are similar to the Internet mayinvolve the transfer of packets of information and use of Internetprotocols such as TCP/IP for transmitting data or that comprise multiplenodes capable of communicating with each other, and using Internetprotocols or other network protocols for sending and receiving packetsof data in a consistent and useful manner even where one or more nodesof the network are unable to communicate), or the like. Preferably suchsimilar networks are global, or regional, or otherwise cover asufficient geographic area to facilitate both local and remotemonitoring and control of industrial systems or sites. Because of thepresence of vast infrastructure, use of Internet is economicallypreferable, however may pose additional security concerns related to theindustrial process or setting. In certain embodiments, similar networksthat are not readily accessible from the public Internet may bepreferred as they offer enhanced security. In other embodiments thecommunications are encrypted or other security measures are utilized toenable the use of the public Internet.

A “private network” can include any of the features of the Internet,except that it is generally not publicly accessible. Access to privatenetworks can be limited to those who have the correct access point bywhich to access the network, or it can be limited to those who canproduce proper credentials or who can authenticate their access to thenetwork. Such access can be restricted by use e.g. of passwords, accesskeys, biometrics, and the like, and may include additional steps such asmultifactor authentication to ensure security of the private network.Networks may also be structured essentially as hybrids wherein e.g. aportion of the network or a subnetwork or connected network iscompletely private (i.e. limited to a very specific audience) andanother portion (or subnetwork or connected network) is open to abroader audience, or even publicly available.

As used herein, “permission” or “permissioned” mean that a party has anagreed-upon authorization to perform an action with respect the digitalblockchain currency (or tokens); i.e. that the parties to the privatenetwork have authorized that party to digitally mint in-circulationcurrency, to modify the blockchain by appending one or more additionalblocks thereto, to acquire, redeem, or transact business with thedigital blockchain currency. Within the system, there can be multiplelevels of permission granted to different parties for differentpurposes. For example only the central authority can create newout-of-circulation tokens, and only financial institutions that arebanks can digitally mint in-circulation currency e.g. within limits andcontrols set by the central authority. In other circumstances, thecentral authority may be the only party that can mint in-circulationcurrency, which it can issue to its banking network for distribution. Insome embodiments the central authority handles all clearing andmanagement of reserves over the digital currency. The central authoritycan both mint and own in-circulation tokens. In one embodiment, banksalong with all other financial institutions can view the blockchain datafor any electronic token, whether or not they minted it. In anotherembodiment, only a financial institution with a direct or indirectownership interest can view the blockchain for a particular token—i.e.they can only view the blockchain if they own (or previously owned) thattoken, one of their customers owns (or previously owned) it, or it isbeing presented to them for deposit or payment or the like. Otherparties (such as customers, clients, vendors, or merchants) may only tobe able to view the blockchain for tokens which they have a specificreason—for example tokens they currently own (e.g. in a virtual bankaccount). In other embodiments parties can view the blockchain fortokens that are part of a ‘smart transaction’ (such as an electronicinvoice or agreement) in which they have a legitimate interest. Lendersmay be able to view tokens in a borrower's account or which referencethe borrower in a transaction. In certain embodiments, a prior owner ofa token may be able to view the subsequent blockchain of a token underappropriate circumstances.

The value of a given in-circulation digital blockchain token is statedas a number of “physical currency units” of the corresponding real worldcurrency specified for that token. In a preferred embodiment the numberof currency units are expressed as the number of “minimal physicalcurrency units” in circulation for that currency. For example, if thecorresponding real world currency is U.S. dollars, the minimal physicalcurrency units are pennies, i.e. cents ($0.01). If, for example, thetoken represented US $1.08 the value would be expressed as 108 (cents).A token representing US $7897.23 would have a value key of 789723(cents). In another embodiment, a fractional value of the “minimalphysical currency units” in circulation can be transacted, such as whenmicropayments are required. An example of such micro transactions wouldbe a payment for a service or feature in the Internet of Things (IoT).

A “real world currency” is generally a currency that currently exists orpreviously existed in at least one physical form such as coins or papermoney. Real world currencies include both ‘traditional’ currencies usedby any nation, e.g. as legal money, as well as digital currencies thatare used as legal money or issued by any central bank or under theauthority of any recognized government or the like. The skilled artisanwill appreciate that in many modern transactions ‘real world’ currenciesexist primarily as electronic currency—i.e. as represented by an accountbalance, an electronic transfer or payment of funds, transfers betweenclearing banks, and such. For purposes herein, currencies that have botha physical and electronic counterparts are ‘real world’. In contrast,private cryptocurrencies that are not in common official use by anycountry, or approved by any government as official currency, nor readilyavailable at commercial banks are generally not ‘real world’ currenciesfor purposes herein, even if such currencies are accepted by e.g. someprivate vendors, merchants, or retailers. Moreover, as some countriesare considering doing away with physical currency altogether in favor ofdigital currency, traditional currencies or real world currencies thatdo not have or no longer have a physical counterpart can also be ‘realworld’ currencies herein, as well as any after-developed currencies thatmeet the foregoing definitions. As long as a currency is legal and canbe held as reserves, then digital currency in accordance with thepresent system and methods can represented such currency and/or bebacked by such currency.

An “invoice” as used herein broadly means any request or demand forpayment of funds to a party making the request or demand from a secondparty, based on any financial obligation including a contractualobligation e.g. under a contract, smart contract, or other smarttransaction. Invoices as used herein are generally generated by e.g.merchants, vendors, suppliers, service providers, licensors, lessors,and the like. The skilled artisan will understand that for convenienceherein an ‘invoice’ can include request for payment in any currency.

As used herein, “transaction” means any financial transaction of anytype or nature between two or more parties. Transactions includeconsumer-to-consumer (“C2C”), consumer-to-business (“C2B”),business-to-consumer (“B2C”), and business-to-business (“B2B”), as wellas financial institution-to-financial institution, financialinstitution-to-consumer, consumer-to-financial institution, financialinstitution-to-business, and business-to-financial institutiontransactions. For purposes herein, a business can include a governmententity that has financial transactions with consumers, other businesses,other governments, and financial institutions. Transactions hereunderare generally conducted via digital currency, but may include real worldcurrency, combinations of digital and real world currency, or evenexchange of goods or services, in part or whole, or in combination withreal world or digital currency. Transactions can be conducted by paymentby any means including point of sale and online transactions, payingvendors or merchants, collecting accounts receivable, borrowing,lending, foreign exchange, ATM transactions, clearing monetarytransactions, and arrangements via ‘smart’ electronic agreements.

“Smart transactions” hereunder means

“Payment” hereunder means completing a financial transaction orsatisfying a financial obligation. In preferred embodiments, payment ismade within the system using digital currency. In various embodiments, apayment is made automatically or upon ‘authorization’ by a party, forexample upon approval of an invoice, a smart transaction or the like. Itis understood that any party authorizing a payment can make that paymentdirectly or indirectly. I.e. an approving or authorizing party may usee.g. a third party, an agent, or a proxy to make such authorizedpayments on their behalf. In preferred embodiments, such third party hastheir own account (e.g. a VBA, VCA, or VFX) within the system from whichto make such payments. In other embodiments the third party or agent hasadequate permission to make payment directly from the approving orauthorizing party's account.

“Dispute resolution” as used herein means any method of resolvingdisputes in the digital currency system. Typical disputes may includedisputes over refunds, or disputed invoices, disputed smart transactionsor the like. In various embodiments, the system provides elegant meansof resolving such issues based on the relationship of the parties (e.g.consumer to consumer, business to consumer, or business to business) andthe terms of any agreement (e.g. refund terms) between these parties.Such dispute resolution within the system may be conducted viapeer-to-peer electronic contracts, including data and digital currencyvalue exchange. In various embodiments, smart transactions that specifythe details of how disputes are resolved are used between parties.Preferably disputes such as refunds are processed automatically andresolved electronically in accordance with the terms recorded in thesmart transaction. In this manner, disputes are not subject to one partyrefusing to cooperate or comply.

As used herein, “refund” means a request or demand for the return of allor part a payment made for an “invoice”, under an agreement between theparties, or under a smart transaction. In cases where the parties of atransaction are unable to cooperate and comply to the refund terms of anagreement, or a smart transaction a third party dispute resolution meansof such resolution can be provided to mediate and negotiate suchresolution.

A “key” as used herein sometimes refers to e.g. a key within the contextof encryption and decryption, such as a public/private key pair. Keysare often required herein for functions such as accessing, encrypting,decrypting, viewing, appending and such with respect to electronicfiles, blockchains, blocks of data, and the like in the private systemsuch as on networks, or in databases, or data that is passedpeer-to-peer or received from another party in the system. “Key” alsomore generally indicates a means for providing digital access to a file,or a method of authenticating a party and an action taken with in thesystem or with respect to a blockchain, block, data file, or the like. Akey may represent or require a password, or other suitable indicia ofpermission to a party within the system. Key management includes issuingof permissions, passwords, digital access, and other authenticationmeans (including biometrics). Key management further includesreaffirmation, revocation, reissuance and the like with respect topermissions, keys, passwords, digital access and the like. Keymanagement is important for maintaining the high degree of confidenceand trust among the parties in the private financial systems providedherein. Methods for key management in secure systems are known in theart. A “digital signing key” as used herein comprises at least a digitalmeans of ensuring a party's identity and verifying that a file or dataentry was created by that party, or that an action taken was in facttaken by that party. The strength of the digital signing keys willcorrespond directly to the confidence that the key represents the partyand that use of the key is an authorized action of the party to whom thekey belongs.

As used herein “substantially” may mean an amount that is larger orsmaller than a reference item. Preferably substantially larger (orgreater) or smaller (or lesser) means by at least about 10% to about100% or more than the corresponding reference item. More preferably“substantially” in such instances means at least about 20% to about100%, or more, larger or smaller than the reference item. As the skilledartisan will appreciate the term ‘substantially’ can also be used as in“substantially all” which mean more than 51%, preferably more than 60%,67%, 70%, 75%, 80%, 85%, 90%, or more of a referenced item, number, oramount. “Substantially all” can also mean more then 90% including 91,92, 93, 94, 95, 96, 97, 98, 99 or more percent of the referenced item,number, or amount.

As used herein, the singular form of a word includes the plural, andvice versa, unless the context clearly dictates otherwise. Thus, thereferences “a”, “an”, and “the” are generally inclusive of the pluralsof the respective terms. For example, reference to “a sensor” or “anindustrial process” includes a plurality of such “sensors” or“processes”.

The words “comprise”, “comprises”, and “comprising” are to beinterpreted inclusively rather than exclusively. Likewise the terms“include”, “including” and “or” should all be construed to be inclusive,unless such a construction is clearly prohibited from the context.Further, forms of the terms “comprising” or “including” are intended toinclude embodiments encompassed by the phrases “consisting essentiallyof” and “consisting of”. Similarly, the phrase “consisting essentiallyof” is intended to include embodiments encompassed by the phrase“consisting of”.

Where used herein, ranges are provided in shorthand, so as to avoidhaving to list and describe each and every value within the range. Anyappropriate value within the range can be selected, where appropriate,as the upper value, lower value, or the terminus of the range.

The formulations, compositions, methods and/or other advances disclosedhere are not limited to particular methodology, protocols, and/orcomponents described herein because, as the skilled artisan willappreciate, they may vary. Further, the terminology used herein is forthe purpose of describing particular embodiments only, and is notintended to, and does not, limit the scope of that which is disclosed orclaimed.

Although any formulations, compositions, methods, or other means ormaterials similar or equivalent to those described herein can be used inthe practice of the present invention, the preferred formulations,compositions, methods, or other means or materials are described herein.

Any patents, patent applications, publications, technical and/orscholarly articles, and other references cited or referred to herein arein their entirety incorporated herein by reference to the extentpermitted under applicable law. Any discussion of those references isintended merely to summarize the assertions made therein. No admissionis made that any such patents, patent applications, publications orreferences are prior art, or that any portion thereof is either relevantor material to the patentability of what is claimed herein. Applicantspecifically reserves the right to challenge the accuracy and pertinenceof any assertion that such patents, patent applications, publications,and other references are prior art, or are relevant, and/or material.

Detailed Description of Illustrative Embodiments

Systems and methods for utilizing blockchain digital currencies in aprivate network of financial institutions are provided. Such systemsgenerally feature:

a private network of financial institutions who by agreement participatein the system;

a central authority;

electronic tokens comprising blockchain digital fiat currency;

a reserve of real world currency that backs the blockchain digitalcurrency;

a network of private servers having distributed databases that containthe blockchain data for out-of-circulation electronic tokens, andin-circulation digital token representing currency;

a plurality of customers, consumers, vendors, merchants, lenders,borrowers and the like;

restricted access to permissioned parties where only parties havingadequate permission to mint currency, access blockchains, transactbusiness with the blockchain digital currency, redeem the digitalcurrency for real world currency, and the like; and

computer modules (such as API's) that provide a large degree of addedfunctionality such as clearing the digital currency for real worldcurrency, and/or exchanging digital currency denominated in one realworld currency for digital currency denominated in a different realworld currency.

These and other features of the systems and methods will be described inmore detail below.

I. Hybrid Currency Systems Providing Private, Permissioned BlockchainDigital Currency and Traditional Real World Currency.

In a first of its several aspects, hybrid currency systems are providedherein. The systems are private, permissioned systems blockchain digitalfiat currencies that are established and controlled by agreement of agroup of financial institutions who are authorized to ‘mint’ orcirculate electronic representations of real world currency which areuseful in a variety of transactions including consumer purchasing,business-to business transactions including paying vendors or merchantsand collecting accounts receivable, borrowing, lending, foreignexchange, and arrangements via ‘smart’ electronic contracts.

The systems thus generally comprise a plurality of electronic tokensrepresenting blockchain digital currency that is out of circulation inthe system (“out-of-circulation tokens”), each such token comprising ablockchain including an out-of-circulation block comprising a pluralityof the following data:

-   -   i) a real world currency ID key;    -   ii) a null issuing financial institute (FI) key;    -   iii) a null issue timestamp;    -   iv) a null party name ID;    -   v) a null party account ID;    -   vi) a null party ‘transfer to’ timestamp; and    -   vii) a value key wherein the quantity is zero.

The systems also include one or more unique digital security features oneach out-of-circulation token to provide security and traceability, andto ensure authenticity for that token such as public key encryption,digital hashtags, and the like.

A plurality of electronic tokens representing blockchain digital fiatcurrency that is already in circulation in the system (“in-circulationdigital currency”) is also part of the system. Each in-circulationdigital currency token comprises a blockchain that includes theout-of-circulation block and further comprises an appended“in-circulation” block comprising a plurality of the following data:

-   -   1) a real world currency ID key;    -   2) an issuing financial institute (FI) key;    -   3) an issue timestamp;    -   4) a party name ID;    -   5) a party account ID;    -   6) a party ‘transfer to’ timestamp; and    -   7) a value key specifying the value of the token expressed as        the number of “minimal physical currency units” in circulation        for the corresponding real world currency. As defined herein,        for in-circulation currency tokens denominated in U.S. dollars,        the minimal physical currency units are based on a penny (i.e.        one cent, $0.01).

The systems further comprise a plurality of participating financialinstitutions including banks and nonbanks. For each participatingfinancial institution that is a qualified bank, the system includes apublic/private mint key pair that allows the bank to digitally mintin-circulation digital currency by modifying the blockchain ofout-of-circulation tokens by appending an in-circulation block to theexisting blockchain. Only holders of valid mint keys can digitally mintin circulation digital currency tokens because of the unique digitalsecurity features on the out-of-circulation tokens.

Each bank may mint currency based on behalf of itself (i.e., for its ownoperations) or on behalf of its customers and clients (i.e. uponrequest). If the bank mints in-circulation digital currency for itself,it must put up the reserves itself, and will generally hold the newlyminted digital currency in one or more virtual ‘house’ accounts. Thetokens for the in-circulation currency will reflect the bank as theproper owner. If a request comes in from a customer or client, the bankmay fulfill such request from its own holding of digital currency inaccordance with its own rules and relationship with that customer, inwhich case the blockchain will be modified by appending a blockreflecting the transfer to the new owner (i.e. the customer requestingthe digital currency). Or the bank may mint new in-circulation currencyin accordance with the request. Generally the bank will transferreal-world funds from the customer's or client's real world account inthe amount of the digital currency requested and transfer digitalcurrency for the same amount the customer or client's virtual account.In some embodiments, the amount transferred will first settle therequest using digital currency transferred from the bank's virtualaccount to the customer's or client's virtual account, and only mintadditional digital currency for the balance of the request. In otherembodiments, the bank may mint the digital currency for the entireamount of the request. In such cases, the transferred and newly minteddigital currency will include information in the blockchain reflectingthe requesting customer/client as the owner. In various embodiments, thefinancial institutions in the system will utilize a first-in, first-outsystem to address its minting needs. For example, if a bank is holdingin-circulation digital currency for its own use, or has acquired and isholding in-circulation currency minted by other banks during othertransactions, the financial institutions will preferably use thatin-circulation digital currency to satisfy any demand before minting newdigital currency into circulation.

A central authority that creates and issues the out-of-circulationtokens, creates and implements the digital security features for theout-of-circulation tokens, establishes permissions for parties to thesystem, and issues public/private mint key pairs (for qualified banks)and other public/private decryption key pairs to parties in accordancewith their permissions.

The systems also comprise a plurality of private servers comprisingnon-volatile computer memory storing:

-   -   a) one or more distributed databases comprising:        -   (i) the out-of-circulation tokens; and        -   (ii) the in-circulation digital currency in the system;    -   b) executable computer code/computer readable instructions        sufficient to limit access to the blockchains for        out-of-circulation tokens to public/private mint key holders, to        allow said key holder to append an in-circulation block to the        keychain to digitally mint in-circulation digital currency;    -   c) executable computer code/computer readable instructions        sufficient to allow the blockchains of in-circulation digital        currency tokens to only be modified by public/private decryption        key holders with sufficient permissions, and to append new        blocks to said blockchains;    -   d) executable computer code/computer readable instructions        sufficient to accurately store each blockchain so modified in        the databases; and    -   e) executable computer code/computer readable instructions        sufficient to create and store a unique timestamp corresponding        to each such blockchain modification; and    -   2) one or more processors capable of executing the code.

The skilled artisan will appreciate that the servers are functional andthus have all required hardware for their intended purpose whether ornot expressly stated (e.g. data buses, ROM, RAM, CPU, and the like).

The system also comprises a network comprising connections between theseveral private servers including means for distributing the databasesbetween the servers comprising private peer-to-peer connections, orother private permissioned connections, or an electronic portal foraccessing said databases; such that the out-of-circulation tokens andthe in-circulation digital currency tokens are accessible to thefinancial institutions having permission. In contrast with presentlyused cryptocurrencies in general, the out-of-circulation tokens arecreated (i.e. ‘minted’) by “fiat” and not mined.

In various embodiments, the participating financial institutionscomprise qualified banks and other (nonbank) financial servicescompanies.

In presently preferred embodiments the system further comprisingreserved funds in real world currency, which are provided by a qualifiedbank in proportion to the amount of in-circulation digital currency thatis digitally minted by the bank from out-of-circulation tokens. Theamount of such reserves can be determined by the initial agreementbetween the financial institutions, or by the central authority. In oneembodiment the total amount of in-circulation digital currency in thesystem is equal to the total reserved funds in real world currency heldby the banks. In other embodiments, the reserves may be a fraction ofthe in-circulation digital currency (i.e. a fractional reserve system).

It may be noted that one of the features of the present system is thatit is entirely trust based. And while reputable financial institutionsmay tend to trust other reputable financial institutions, the closer asystem comes to a full reserve, the easier establishing and maintainingtrust between the parties becomes. In a full reserve system, all partiesare protected inherently by the reserves.

The system further comprises a plurality of virtual bank accounts(VBAs), virtual credit accounts (VCAs), and virtual foreign exchangeaccounts (VFXs) in various embodiments. Each such account is associatedwith a party who is a specific account holder—such as a customer orconsumer; a vendor, a merchant, a lender, or a borrower; or anycombination thereof. Financial institutions can also have one or moreaccounts to hold in-circulation digital currency that they have mintedfor themselves, or which they have come to own. Generally, each accountholder has at least one account that is a VBA, a VCA, or a VFX account.

Each account holder can have any number of virtual bank accounts. Suchaccounts are issued by the financial institutions of the system. Forexample, preferably an account holder may have separate VBA accounts foreach different digital fiat currency that the account holder has with afinancial institution in different real world currency. Preferably, thefinancial institution holds (as deposits) currencies that the financialinstitutions regularly operate with or utilize. While separate accountsholding digital currency may provide a presently preferred approach, itmay be possible in alternative embodiments for an account holder to havea single account that links sub-accounts which hold VFM denominated indifferent real world currencies, or wherein an account holder can accessseparate accounts having VFM in different currencies from a singleportal or electronic access point to facilitate accessing variouscurrencies in separate accounts.

Each account holder can also optionally have any number of VCAs. As withVBAs, such accounts are issued by the financial institutions of thesystem. VCA accounts are established with and held by financialinstitutions that extend lines of credit to third parties. The terms forrepayment of such lines of credit are generally agreed upon between theaccount holders and the financial institution extending the credit, andinvolve the use of in-circulation digital currency. For example, theaccount holder may be responsible for periodic payments, e.g. at the endof a billing cycle established by the financial institution. Or the lineof credit may be for a specified period of time during which there maybe an interest-free period, or interest may accumulate at an agreed-uponrate. Preferably each VCA is denominated in a specific currency thatbest serves its needs for transactions, billing, and repayment.

Each account holder can also optionally have any number of virtualforeign exchange accounts (VFX). VFX accounts are also issued by thefinancial institutions. Holders of such VFX accounts can use the VFMfunds in their VFX account to transact with merchants, vendors, andother parties that accept payment in the currency of the VFX accountwhere the receiving party's funds deposit into their VBA if the currencyis local to them or into their VFX if the currency is foreign. They canalso exchange in-circulation digital currency denominated in one realworld currency for in-circulation digital currency denominated in anyother real world currency. These exchanges are facilitated through avirtual market wherein financial institutions that own in-circulationdigital currency denominated in various real world currencies offer toexchange in-circulation digital currency denominated in one real worldcurrency for that denominated in another. The financial institutions canoffer exchange rates, which may be comparable to other current FXexchange rates between the two fiat currencies. In other embodiments,the exchange rates may be less because the transaction costs may be keptto a minimum.

In one embodiment, a VFX account can alternatively be setup as a VCAwhere a financial institution uses its VFM for approved transactions inthe currency in which the VFX denominated and then the financialinstitution bills the VFX account holder in the same currency.

In various embodiments, parties may simultaneously fill multiple rolesin the system. For example, a bank may also be a customer of othervendors in the system; a vendor or merchant may also be a borrower, andso on.

In a presently preferred embodiment the holders of virtual bank accountsthat are individuals (e.g. customers or consumers) or businesses (e.g.merchants or vendors) are fully compliant with requirements of thefinancial institutions, including applicable regulatory requirements inthe jurisdiction(s) that the financial institution operates. Suchrequirements may include, for example, identification of the customer orconsumer (such as Know Your Customer rules and the like), anti-moneylaundering requirements, verification of credit worthiness or the like,and/or other applicable regulatory requirements.

A. Expanding the Functionality of the System with Various Modules.

In one embodiment, the functionality of the system can be expandedextensively, e.g. via software modules that interfaces with the system.Generally, one or more of the servers in the private network, or serversconnected thereto further comprise modules featuring computer readableinstructions for one or more of the following functions:

-   -   a) digital minting of in-circulation digital currency from        out-of-circulation tokens;    -   b) acquisition of in-circulation digital currency tokens in        exchange for real world currency or traditional electronic funds        denominated in real world currency;    -   c) redemption of in-circulation digital currency in exchange for        real world currency or traditional electronic funds denominated        in real world currency (with or without subsequent removal of        some or all of the in-circulation digital currency from        circulation);    -   d) bank to bank clearing of in-circulation digital currency in        exchange for real world currency or traditional electronic funds        denominated in real world currency;    -   e) peer-to-peer payments between any two or more parties in the        system;    -   f) peer-to-peer electronic contracts and data exchange between        any two or more parties in the system;    -   g) vendor invoices (e.g. via peer-to-peer smart transaction data        exchange, and payments between parties, e.g. a vendor and one or        more other parties in the system);    -   h) vendor refunds (e.g. via peer-to-peer smart transaction data        exchange, and payments between parties, e.g. a vendor and one or        more other parties in the system);    -   i) merchant transactions (e.g. via peer-to-peer smart        transaction data exchange, and payments between parties, e.g. a        merchant and one or more other parties in the system);    -   j) merchant refunds (e.g. via peer-to-peer smart transaction        data exchange, and payments between a merchant and one or more        parties in the system);    -   k) person to person transfers of in-circulation digital        currency, (including but not limited to transfers via        peer-to-peer smart transactions with optional “IOU” payback        agreement);    -   l) same party account transfers for transferring in-circulation        digital currency;    -   m) a lending marketplace for matching borrowers and lenders of        in-circulation digital currency (including but not limited to        such matching comprising peer-to-peer smart transactions, and/or        data exchange);    -   n) a foreign exchange marketplace for exchanging in-circulation        digital currency denominated in a first real world currency for        in-circulation digital currency denominated in a second real        world currency;    -   o) automated teller machine deposits and withdrawals including        “human” as well as machine based ATMs (for example via        peer-to-peer smart transactions, data, and/or digital currency        value exchanged for real world currency);    -   p) invoice factoring (for example factoring comprising        peer-to-peer smart transactions, data and/or digital currency        value exchange);    -   q) collections of invoices or debts comprising peer-to-peer        smart transactions, data, and/or digital currency value        exchange;    -   r) dispute resolution (for example refund disputes); and    -   s) key management and associated functions.

Because of the inherent security built into the blockchain digitalcurrency tokens, and with the appropriate use of additional securitymeasures (including but not limited to encryption technology, passwordprotection, VPNs, two-part or multipart authentication, biometrics, orthe like), one or more of the additional functions can be accessible orprovided outside of the private network. In one embodiment, theadditional functions may be accessible through a public network,including the public internet.

In a presently preferred embodiment, the foregoing functions arespecified and provided via a series of application programminginterfaces (APIs). By providing the APIs, the end applications are moreeasily developed and customized to work within the overall system.Moreover, each API can be tailored to the specific needs and thespecific permissioned parties who will have access to the functionsprovided via any particular API.

With respect to the functions described above, in one embodiment theacquisition of blockchain digital currency comprises direct exchange forreal-world currency or electronic funds denominated in units of realworld currency for the blockchain digital currency. In one embodiment,such direct exchange comprises internal transfer of real world currencyout of the “transfer to” account holder's bank account. In variousembodiments, real world currency is transferred via automated clearinghouse (ACH)/electronic funds transfer (EFT), via cash, check,credit/debit card, or other means of value transfer within the currentfinancial ecosystem.

In a presently preferred embodiment, the acquisition of virtual fiatcurrency (i.e. blockchain digital currency) from a financial institutionby e.g. a customer or client, employs a “first-minted, first utilized”strategy on the part of the financial institution with respect to themint date of the in-circulation blockchain digital currency. Thestrategy relies on and is based on the issue date for the particulartokens, i.e. the date the in-circulation currency tokens were mintedfrom out-of-circulation tokens. In particular, the financialinstitutions always first use the oldest (i.e. the first-minted) of anydigital currency tokens presently owned by the financial institutionwhich it did not originally mint into circulation (fromout-of-circulation tokens), and then the next oldest, and so on, untilthe financial institution's supply of in-circulation digital currency isexhausted. If the acquisition exhausts the bank's supply ofin-circulation digital currency the bank may then mint newin-circulation digital currency from out-of-circulation tokens inaccordance with the procedures for doing so, as described above. Theskilled artisan will thus appreciate that the blockchain digitalcurrency can be utilized in a first-minted to most recently mintedmanner, and finally new currency is minted when needed.

If the financial institution is not a bank, after it exhausts any supplyof in-circulation digital currency it presently owns in an oldest tonewest fashion, it would then acquire additional in-circulation currencyfrom another source that owns currency, or it will acquire the neededcurrency from a bank who may mint new currency if needed, consistentwith the foregoing. In some embodiments, if a bank exhausts its ownsupply of in-circulation digital currency, it may also acquireadditional in-circulation currency from another party, rather thanminting new in-circulation currency from out-of-circulation tokens. Forexample, in some embodiments, a bank may obtain in-circulation currencyfrom the central authority, such as in a system where the centralauthority is a central bank that also mints the in-circulation currencyfrom out-of-circulation tokens.

In some cases, the acquisition request may not exhaust a financialinstitution's supply of in-circulation digital currency, or may totalless than the financial institution's supply of in-circulation digitalcurrency, in which the financial institution can effectively “split” atoken to allow the precise amount of the request to be met. For example,if a financial institution has 10 in-circulation digital currency tokensin an in-house account, and they are valued at $100 each, they canreadily fulfill an acquisition request for, e.g. $800 by transferringthe eight oldest (first-minted) tokens to the requestor's virtualaccount (by appending to the blockchain a block comprising datareflecting the new ownership, date of transfer, and the like). However,if the request is for e.g. $750, the financial institution can transferthe seven oldest in-circulation digital currency tokens (totally $700)to the virtual bank account of the requestor (by appending theappropriate useful data to the blockchain of those tokens). To fulfillthe remaining $50 of the request, the financial institution can ‘split’or divide the next oldest token into two. In this case the split token'sownership would reflect that $50 of its value is owned by the requestorand is present in the requestor's VBA, while the financial institutionwould remain the owner of the balance of $50 in the form of a new(“child”) token. The appropriate changes would be appended to theblockchain of the relevant tokens and ‘child’ tokens resulting fromsplit tokens always trace back to the original split token and itsminting into circulation. The new child token preferably comprises ablockchain that features the underlying data of the original or parenttoken—e.g. the same issuing bank, the issue or mint date, etc., and isdenominated in the same real world currency. The blockchain of coursethus provides a full auditable trail of all transactions, as well astransfers of ownership of those such tokens. The skilled artisan willappreciate that the dividing or splitting of in-circulation digitalcurrency is expected to be a normal part of the process in order for thesystem to be able to provide for transactions, payments, redemptions,loans, and the like in any amount. Generally there will be at most onlya single token that needs to be split in any particular transaction inthe system, for example for settlement of a peer-to-peer transaction. Invarious embodiments, one or more tokens may be ‘split’ in order to alsosettle fee shares of each transaction to the parties eligible for suchtransaction fee shares on transactions applicable to such fees. Whentransaction level fee sharing is in effect, it is settled with eachtransaction to all of the applicable fee sharing parties related to atransaction such that these parties need not otherwise bill and settlethese fee shares already settled with each transaction.

The present system provides features that allow the blockchain digitalcurrency to conveniently interact with, interconnect with, and harmonizewith the existing real-world currency systems. The acquisition,redemption, and/or clearing functions provide such connection. Invarious embodiments, the blockchain digital currency can be redeemedand/or cleared for physical/real-world currency or electronic fundsdenominated in units of real world currency. The skilled artisan willappreciate that only in-circulation digital currency can be so redeemedand/or cleared, since out-of-circulation tokens have no value. Moreover,it will be appreciated that each token can only be acquired, redeemed,and/or cleared for the real world currency in which it is denominated.As described herein, foreign exchange functions provide separate usefulfunctionality for exchanging blockchain digital denominated in a firstreal world currency for blockchain digital currency denominated in asecond real world currency.

In various embodiments, redemption can be made for all or part of thevalue of a particular token for in-circulation currency or group of suchtokens. In one embodiment, when a redemption request is made by theowner of particular blockchain digital currency, the redemption ispreferably done through the bank (the issuing bank) which minted thelargest cumulative value of the digital currency oldest tokensimplicated in the redemption request. In other embodiments, theredemption of in-circulation currency may be handled by the bank of acustomer of the bank through which the redemption request account istransacted.

If the sum of the values of all in-circulation currency involved in aredemption request exceeds the total of the amount requested in theredemption request, then the most recently issued of these tokens issplit in a manner analogous to that described above for acquisition ofin-circulation currency. I.e., the financial institution doing theredemption creates a new/child token with a value equal to the amount bywhich the total of the tokens to be redeemed exceeds the redemptionrequest. The new token (‘split token’ or ‘child token’) is issued withsame original issuing bank ID and issue date, and is denominated in thesame real world currency as the token being split (the parent token).The redeemed portion of the parent token is transferred to the bank orfinancial institution processing the redemption request along with allof the other older tokens comprised in the redemption request.Preferably, the in-circulation digital currency tokens that wereoriginally minted by the financial institution handling the redemptionare converted back into out-of-circulation tokens, and the funds held asreserves for these tokens can be used to honor that portion of theredemption request by paying to the requestor. Tokens for in-circulationcurrency not originally issued by the redeeming bank or financialinstitution are now owned by this financial institution and the bank'sinternal funds equal to this amount are used to fulfill the balance ofthe redemption request. The redeeming bank or financial institution cansubsequently use the remaining in-circulation digital currency for,e.g., acquisition requests, other payment transactions, or may clear allor a portion of that remaining in-circulation digital currency throughthe bank to bank clearing procedures. In each case, after any redemptionor any partial redemption and concomitant splitting of any token, theblockchain of each in-circulation token is appended with a blockcomprising data sufficiently detailing the transaction, and reflectingany changes in ownership or the like.

In certain embodiments herein, the tokens can further include a parenttoken ‘key’ that has a null if the token has not been split from aparent. If a token has been split from a parent the token will reflectthe immediate parent.

Clearing of funds between financial institutions (e.g., ‘clearingbanks’) is another important part of modern financial systems. Thesystem herein provides bank to bank clearing of blockchain digitalcurrency in exchange for electronic funds denominated in thecorresponding real world currency. Clearing can also be used in variousembodiments to exchange current ACH, EFT, check, wire (and otherbank-to-bank transactions) for digital currency Such transactions inreal world currency are currently cleared through a central bank (suchas the Federal Reserve in the US).

Any bank holding an amount of in-circulation digital currency that itdid not originally mint/issue, and which it has subsequently funded withits own funds can request to clear all or a portion of thein-circulation digital currency it holds. Clearing transactions, likeother transaction in the system are preferably handled on afirst-minted, first utilized basis, as discussed above. Thus, the oldestissued (first-minted) tokens are cleared first. Clearing requests aredone on a bank-by-bank basis, i.e. clearing of in-circulation currencyis performed by the bank that originally minted the in-circulationcurrency tokens presently held by another bank presenting them forclearance. Requests to each issuing bank may include a bulk request forclearance comprising a plurality of in-circulation digital currencytokens. Each bank is required to promptly settle any in-circulationdigital currency that they originally issued, in any amount, whenpresented for clearing. When the in-circulation tokens are cleared bythe minting banks the reserve real world funds held by the clearing bankin connection the digital currency tokens to be cleared is transferredvia automated clearing house (ACH)/electronic funds transfer (EFT) tothe bank or financial institution requesting the clearance; thein-circulation digital currency are removed from circulation andconverted back to out-of-circulation tokens by the clearing bank byappending the appropriate block(s) of data to the tokens.

Peer-to-peer payments and peer-to-peer electronic contracts and dataexchange among users of the private system are also functionalities thatare provided in the system. The functionalities in various embodimentsutilize the first-minted, first out logic for payments and transfers ofin-circulation currency. It is to be understood that only ‘peers’ withinthe private system are able to participate in such functionality. Allpeers must have one or more virtual accounts within the system. Any peermaking a payment must own, (or have sufficient credit in a virtualcredit account for), in-circulation currency in amount at least equal toany amount being paid. The flexibility and extensibility of the systemcan be maximized through the software, for example using XML or JSONarguments and by allowing additional and optional types of informationand data, such as imbedded EDI, ACH, ISO, XML, JSON, or other standardtransaction formats, self-describing data formats, and/or otheragreed-upon data formats now known or hereafter developed. In variousembodiments optional image/document type and attachments are compatiblewith the system. In one embodiment the data can include scanneddocuments, images, spreadsheets, and the like. In another embodiment,any text in scanned documents or images can be processed with opticalcharacter recognition. In certain embodiments the system is highlymobile-friendly and allows certain data to be readily entered from smartphones, by emailing, sending scans or photographs of documents, images,and the like. The peer-to-peer transactions and related functionscomprise a distributed database having blockchain data records regardingall such transactions. The data therein are preferably immutable, andsecure. Encryption of sensitive data is provided and access throughappropriate keys to parties with permission can be readily implemented.Parties can review detailed audit trails, as well as review financialsummaries, net data and the like.

Transactions and functions such as vendor invoices; vendor refunds,merchant transactions, merchant refunds, loans, and person to persontransfers (including optional IOUs, reminders of interpersonal debts,notes, private party loans and such) can be handled in the system viapeer-to-peer smart transactions, data exchange, and/or payments asprovided above.

The system also comprises key and permission management functionality.Keys and permissions in such systems must be carefully maintained byboth those able to grant permissions or create keys, and those who areentrusted with them. Keys or other permissions may be lost or stolen, orcritical passwords or other means of accessing such keys or permissionsmay be lost or stolen. Alternatively, the secure status of a key orpermission may be questioned because of a security breach in or trespassto physical or electronic systems. In various embodiments, softwaremodules or APIs are included in the system to allow granting,suspending, revoking or reissuing key or permissions. Passwords may berequired to be regularly revised or changed. Multi-factor authenticationsystem may be instituted, revised and the like. The end goal of suchsystem is to improve security, and therefore trust in the system.

The skilled artisan will appreciate that the blockchain digital currencyof the present system cannot be mined, or otherwise created in anymanner by which parties (e.g. banks and other financial institutions)can be compensated. Accordingly, the banks in the present system are notcompensated by creating (or “digitally minting”) in-circulation digitalcurrency. In one embodiment the financial institutions are insteadcompensated through transaction, subscription, and/or other banking andfinancial service fees. It is anticipated that the fees will be lowsince the costs of transactions in the system is expected to be low. Inanother embodiment, the financial institutions may otherwise realizevalue from use of aggregate or specific transaction data. In yet anotherembodiment, the financial institutions may reap financial benefits fromuses of their own customer's data to provide services for the specificbenefit of the customer (for which services the customer may also pay afee).

In one embodiment, the system further comprises one or more “transactiondatabase” that comprises electronic billing and payment systems (‘smarttransactions’) and/or electronic agreements defining transactionsbetween parties in the system. Such transactions and agreements involvethe in-circulation digital currency and track the transaction detailsand provide an audit trail of the transaction and the in-circulationdigital currency in connection with such smart transaction(s) or smartcontract(s). For convenience, henceforth the term “smart transactions”within the meaning of the present disclosure generally includesagreements that primarily constitute authorizing payments for electronicinvoices, bills, contracts, and the like. Smart transactions in variousembodiments also include fully executory contracts with obligationsinitially owed by each party or covenants made by each of the partiesthereto. Such smart transactions in either case can track the life ofthe obligations, including payment obligations. Preferably, the keyterms of each merchant and vendor invoice payments include refund termsthat can be referenced back should a refund request be disputed.

Preferably the transaction database is stored in the non-volatile memoryof the computer and also comprises a distributed database. In certainembodiments the system comprises sufficient network connections toprovide access to the transaction database to the parties of theelectronic contracts. Generally, only parties to the smart transactionshave access permission to access a particular electronic contract,unless, e.g., another party receives permission from a party to thecontract. Smart transactions are described more fully in Section IIIbelow.

The foregoing systems can be better understood with reference to thefigures. FIG. 1 shows an overview of an embodiment of a hybrid system inaccordance herewith. As can be seen, the central authority 999 has thesole authority to create out-of-circulation tokens 101. Theout-of-circulation tokens 101 comprising a blockchain 102 are onlyaccessible by the financial institutions 105 that are qualified banks110. A qualified bank 110 wanting to put digital currency intocirculation for its own needs or to fulfill a request from a customercan place an amount of real world currency 107 in a reserve deposit 108.The bank 110 can verify that the out-of-circulation token 101 isauthentic via a digital security means 103 such as a hashtag or thelike, and can use its digital minting key 104 to digitally mintin-circulation digital currency 199 in proportion to the amount of realworld currency 107 placed in the reserve deposit 108 by appending anin-circulation block 106 to the blockchain 102.

System 100 is a hybrid currency system featuring both privatepermissioned digital fiat currency and traditional real world currency.The system features network 125 comprising a plurality of servers (notshown) with connections to each of the financial institutions 105 and adistributed database 130. A group of software modules 140 can providemany additional functions such as minting, acquisition, redemption,clearing, foreign exchange services, credit and lending services,automated teller access functions, peer-to-peer transactions, tokensplitting functions, key management, and more.

The system further comprises a plurality of customers 152, consumers154, vendors 156, merchants 158—each of whom hold accounts 160 in thesystem 100. The private network and the database are only accessible tosuch parties with permission. Various parties within the system may havedifferent levels of permission for different functions and uses of thein-circulation digital currency 199.

II. Method of Implementing and Using a Private, Permissioned BlockchainDigital Fiat Currency.

In a second of its several aspects, this disclosure provides methods forimplementing and using a private permissioned blockchain digital fiatcurrency. The methods generally involve establishing a central authorityto issue a plurality of electronic tokens representing blockchaindigital currency that is out of circulation in the system(“out-of-circulation tokens”). The out-of-circulation tokens have zerovalue, and each token comprises a blockchain that initially includes an“out-of-circulation” block comprising a plurality of the following data:

-   -   i) a real world currency ID key;    -   ii) a null issuing financial institute (FI) key;    -   iii) a null issue timestamp;    -   iv) a null party name ID;    -   v) a null party account ID;    -   vi) a null party ‘transfer to’ timestamp; and    -   vii) a value key wherein the quantity is zero;

The out-of-circulation tokens include unique digital security feature(s)generated by the central authority on each out-of-circulation token toensure security, traceability, and authenticity for that token. Thetokens can be encrypted with public keys such that only qualified bankscan access the out-of-circulation tokens. Digital signatures, digitalfingerprints, hashtags or the like can be used to ensure authenticity.

The methods comprise recruiting or getting a plurality of financialinstitutions to become parties by mutual agreement to a privatepermissioned network in connection with the digital fiat currency. Thecentral authority establishes unique permissions for each of thefinancial institutions to identify each such financial institution inthe system.

For each participating financial institution that is a qualified bank(as determined, e.g., by agreement), the central authority generates aunique public/private mint key pair that allows the bank to digitallymint in-circulation digital currency by modifying the blockchain ofout-of-circulation tokens by appending an in-circulation block on to theblockchain, notwithstanding the unique digital security features on theout-of-circulation tokens. The skilled artisan will appreciate that thecentral authority may use a single public group key that will enableeach of the banks to use their own private key to digitally mintcurrency as set forth herein. Thus while each bank must have a uniqueprivate key for decrypting, and a public key for signing orauthenticating documents signed by the bank, the central authority mayhave a public group key that can encrypt the tokens in a manner thatonly financial institutions that are banks can decrypt the blockchainand append data to it in the manner required to mint in-circulationcurrency from out-of-circulation tokens.

The methods further comprise the step of providing a plurality ofprivate servers. Each server comprises

-   -   1) non-volatile computer memory storing:        -   i) one or more distributed databases comprising:            -   a) the out-of-circulation tokens; and            -   b) the in-circulation digital currency in the system;        -   ii) executable computer code/computer readable instructions            sufficient to limit access to the blockchains for            out-of-circulation tokens to public/private mint key            holders, to allow said key holder to append an            in-circulation block to the keychain to digitally mint            in-circulation digital currency;        -   iii) executable computer code/computer readable instructions            sufficient to allow the blockchains of in-circulation            digital currency tokens to only be modified by            public/private decryption key holders with sufficient            permissions, and to append new blocks to said blockchains;        -   iv) executable computer code/computer readable instructions            sufficient to accurately store each blockchain so modified            in the databases;        -   v) executable computer code/computer readable instructions            sufficient to create and store a unique timestamp            corresponding to each such blockchain modification; and    -   2) one or more processors capable of executing the code; and

A network is established among the private servers, and connections arecreated between the private servers on the network. The network includesmeans for distributing the databases between the servers. Theconnections can comprise private peer-to-peer connections, or otherprivate permissioned connections. In some embodiments the serversprovide an electronic portal for accessing the databases.Out-of-circulation tokens are accessible only to the financialinstitutions (e.g. qualified banks) having permission to access thosetokens. In-circulation digital currency tokens are initially accessibleonly to the financial institutions having permission to access thosetokens.

For each bank electing to digitally mint an amount of in-circulationdigital currency, the bank undertakes the steps of:

-   -   1) reserving funds in proportion to the amount of in-circulation        digital currency the bank elects to digitally mint;    -   2) digitally minting the amount of in-circulation digital        currency by modifying the blockchain for one or more        out-of-circulation tokens by appending thereto an        “in-circulation” block comprising a plurality of the following        data:        -   i) a real world currency ID key;        -   ii) an issuing financial institute (FI) key;        -   iii) an issue timestamp;        -   iv) a party name ID;        -   v) a party account ID;        -   vi) a party ‘transfer to’ timestamp; and        -   vii) a value key specifying the value of the token expressed            as the number of “minimal physical currency units” in            circulation for the corresponding real world currency; and    -   3) repeating steps i(1) through i(2) each time the bank elects        to digitally mint an amount of in-circulation digital currency;

After out-of-circulation tokens are created and in-circulation digitalcurrency has been digitally minted, the method involves allowing a partythat is a financial institution, customer, consumer, vendor, merchantwith permission to use the in-circulation currency in one or moretransactions in the private system.

In each instance, the method, being blockchain-based, comprisesfaithfully/accurately recording the details of the transactions in oneor more blocks appended to the blockchain, providing timestamps andensuring the integrity of the blockchains.

The methods allow a private network of financial institutions togetherwith a central authority, such as a central bank, to issue, utilize, andcontrol a blockchain digital fiat currency that works seamlessly inconjunction with a real world currency, and which can be readilyredeemed or otherwise exchanged for real world currency, or which can beused for electronic transactions and electronic contracts of all typesincluding sales, purchases, lending, foreign exchange and more. Incombination with blockchain digital currency and the electronic smarttransactions provided herein, the methods comprise a powerful methodthat allows financial institutions to benefit from many of theadvantages of blockchain digital currencies while avoiding the pitfalls.The method is trust-based and permission-based such that specificparties have specific roles, and specific privileges within the privatenetwork.

The participating financial institutions in the private networkgenerally comprise banks and nonbank financial services companies. In apresently preferred embodiment, the methods involve a full reserve ofreal world currency, i.e. the total amount of in-circulation currency inthe system is equal to the total reserved funds held by the banks.

In practice the method preferably further comprises a step whereinaccount holders establishing one or more virtual bank accounts, virtualcredit accounts, or virtual foreign exchange accounts at one or more ofthe financial institutions. Each such account is associated with aspecific account holder that is a customer or consumer, a vendor, amerchant, a lender, or a borrower; or any combination of the foregoing.Each account holder thus has at least one account that is a virtual bankaccount, a virtual credit account, or a virtual foreign exchangeaccount. Each customer or consumer has at least one virtual bankaccount.

The roles described above for account holders are not mutually exclusiveand as described above, an account holder can often have different rolesand different accounts of one or more types.

The method further comprises documenting or verifying the identity ofthe holders of virtual bank accounts that are individuals (e.g.customers or consumers) or businesses (e.g. merchants or vendors) andpreferably ensuring they are fully compliant with the regulatoryrequirements of the financial institution establishing the account.

In a presently preferred embodiment the method further comprising thestep of providing computer readable instructions stored in thenon-volatile memory for one or more of the following functions:

-   -   a) digital minting of in-circulation digital currency from        out-of-circulation tokens;    -   b) acquisition of in-circulation digital currency tokens in        exchange for real world currency or traditional electronic funds        denominated in real world currency;    -   c) redemption of in-circulation digital currency in exchange for        real world currency or traditional electronic funds denominated        in real world currency (with or without subsequent removal of or        some or all of the in-circulation digital currency from        circulation);    -   d) bank to bank clearing of in-circulation digital currency in        exchange for real world currency or traditional electronic funds        denominated in real world currency (with or without subsequent        removal of or some or all of the in-circulation digital currency        from circulation);    -   e) peer-to-peer payments between any two or more parties in the        system;    -   f) peer-to-peer electronic contracts and data exchange between        any two or more parties in the system;    -   g) vendor invoices via peer-to-peer smart transactions data        exchange, and payments between a vendor and one or more parties        in the system;    -   h) vendor refunds via peer-to-peer smart transactions data        exchange, and payments between a vendor and one or more parties        in the system;    -   i) merchant transactions via peer-to-peer smart transactions        data exchange, and payments between a merchant and one or more        parties in the system;    -   j) merchant refunds via peer-to-peer smart transactions data        exchange, and payments between a merchant and one or more        parties in the system;    -   k) person to person transfers of in-circulation digital currency        (for example via peer-to-peer smart transactions with optional        “IOU” payback agreement);    -   l) same party account transfers for transferring in-circulation        digital currency;    -   m) a lending marketplace for matching borrowers and lenders of        in-circulation digital currency via peer-to-peer smart contracts        and data exchange;    -   n) a foreign exchange marketplace for exchanging in-circulation        digital currency denominated in a first real world currency for        in-circulation digital currency denominated in a second real        world currency;    -   o) automated teller machine deposits and withdrawals (including        “human” as well as machine based ATMs via peer-to-peer smart        transactions data, and digital currency value exchanged for real        world currency);    -   p) invoice factoring (e.g. via peer-to-peer smart contracts,        data, and digital currency value exchange);    -   q) collections of vendor invoices or debts via peer-to-peer        smart contracts, data, and digital currency value exchange; and    -   r) dispute resolution.

In preferred embodiments, the foregoing functionalities are providedthrough one or more software modules, APIs, or the like providing usefuladditional functionalities to the system and designed to allow thefunctionality to be easily implemented into e.g. applications to be usedby various parties, in accordance with their permissions.

In various embodiments, the methods further comprising the step ofcompensating the financial institutions through transaction,subscription, and other banking and financial services fees. Because theblockchain digital currency is created by fiat and not mined, it is notpossible for financial institutions to be compensated through fees formining or creating the digital tokens representing in-circulationcurrency. In another embodiment, the financial institutions mayotherwise realize value from anonymous use of their customer transactiondata and/or in uses of customer's data for the specific benefit of thecustomer for which the customer may also pay a fee to utilize.

In one embodiment, the one or more distributed databases furthercomprise a transaction database that comprises electronic transactionsor contracts defining transactions between parties involving thein-circulation currency and which track the transaction details andprovide an audit trail of the transaction and the in-circulationcurrency in connection therewith.

In one embodiment, the step of creating connections between the privateservers on the network further comprises creating sufficient networkconnections to provide access to the transaction database to the partiesto the electronic contracts. Access to such transaction is preferablylimited to the parties who are directly involved in the transactions orcontracts.

Public/private key pairs can be used to control access to the contentsof the electronic contracts or transactions and to provide a measure ofdigital security. In other embodiments, the one or more unique digitalsecurity features involve a public key encryption step that requires aprivate key to decrypt said features and access the blockchain for thetokens used to settle the electronic contract or transaction. Othermeans for securing the digital currency tokens are contemplated for useherein. The use of such digital security features is known in the art.In various embodiments, such additional security measures are includedto provide a high level of security and confidence among the partiesusing the systems and methods in connection with digital currency, andparticularly the financial institutions as disclosed herein.

FIG. 2 shows a flowchart of an embodiment 200 of the general methoddescribed above. As the skilled artisan will recognize, the methodsinvolve the interconnections of many aspects of a complex system andthus the order of the steps of this and any method disclosed herein cangenerally be altered except where one step reasonably requires apredicate or a prior step to be carried out first. Unless the order ofsteps is strictly required, they steps and relationships depicted orexemplified should not be deemed to be presented in any particular orderof preference but can be varied where useful. Similarly, except whereapparent from the context of the step, the brief terminology or shortdescription for the various steps is intended to be general and notlimiting.

As can be seen, method 200 comprises a unique approach to utilizingdigital blockchain currency in conjunction with real world currency. Inthe methods generally, a central authority is established 210. Thecentral authority is useful herein because the blockchain digitalcurrency of the instant invention is not mined or discovered, but iscreated by fiat for use by a private network of financial institutions.The network of financial institutions is created (creating step 220).The central authority undertakes the step 230 of creating electronictokens representing out-of-circulation currency. The central authority,in conjunction with the network of financial institutions next exercisesits authority in granting permissions and issuing/managing keys 240 tofinancial institutions based on, e.g. their role in the private network.For example, the financial institutions that are qualified banks aregenerally the only financial institutions that have adequate permissionto mint in-circulation digital currency from out-of-circulation tokens.Creating a private network (step 250) allows the financial institutionsthat are banks with permission to access the out-of-circulation tokenscreated by the central authority. The private network enables providingadditional software modules, APIs, or the like to vastly enhance thefunctionality of the system and the overall application of the methodsprovided herein.

After the network is established, each financial institution that is aqualified bank, using its dedicated, unique keys, can undertake the stepof minting (step 260) in-circulation currency from theout-of-circulation tokens. In order to practice the minting step, aqualified bank must also place real world currency on reserve (step270), in accordance with the requirements of the network of financialinstitutions. In a preferred embodiment, there is a 100% reserverequirement. In other embodiments, the reserve requirement may befractional, i.e. real world reserves may be required for only a portionof the in-circulation digital currency.

When in-circulation digital currency is created, the blockchain of eachindividual token is appended with one or more data blocks that identifythe details of that in-circulation digital currency including at leastthe unique ID of the bank that created or minted that currency, thevalue in the corresponding real world currency, and the date and time ofminting (i.e. a timestamp). The blockchain is immutable and recorded ina database that is distributed in step 290 via the network to partiesthat have adequate permission to view the data. The data may bedistributed peer-to-peer or via other means as is most useful. Theadvantages of using peer-to-peer distribution of such data are known inthe art.

The in-circulation digital currency may be useful in transactionsbetween banks. However, to maximize the use and application of themethods a plurality of virtual accounts (including for example virtualbank accounts, virtual credit accounts, and virtual foreign exchangeaccounts) are created in step 280 for a plurality of banks customers,consumers, vendors, merchants and other members (including financialservices companies, lenders, foreign exchange companies, and the like).Each of the foregoing parties to the system have at least one suchvirtual account and each account is connected to the server networkdirectly or via one or more banks or nonbank financial servicesinstitutions.

In presently preferred embodiments of the methods, the steps of allowingpeer-to-peer transactions (step 285) and providing electronic paymentsystems and electronic smart transactions and smart contracts (step 288)are included. Preferable such steps include allowing peer-to-peertransfer of value via the in-circulation digital currency, in additionto peer-to-peer data transfer.

With further reference to the figures, FIG. 4 depicts an embodiment 400showing aspects of the acquisition of the VFM by banks, e.g. in responseto a request from a customer. As can be seen, aspects of the systemoccur solely in the digital world and involve virtual bank accounts andvirtual fiat money while other aspects occur in the real world andinvolve normal bank accounts and real world currency (‘RWC’). As can beseen a typical process is initiated by a customer request 410 which isreceived by a bank FI 420. A first transfer 430 occurs during which RWCfrom the customer's bank account 440 is transferred to the bank for suchpurposes (e.g. in a house account or the like). Thus RWC is transferredto an account 450 at the bank in an analogous manner to how a customerwould pay for e.g. a cashier's check, foreign currency, or the like. Asecond transfer 460 then occurs during which VFM istransferred/deposited in the customer's VBA 470. The transfer 460 cancomprise two components. The bank will first use VFM 480 it already ownsin its own internal accounts (whether or not the bank previously mintedthe VFM or whether the bank has accepted/received the VFM in atransaction or during the normal course of business. If the bank is notholding sufficient existing VFM, the bank can mint such additional VFM490 as desired or e.g. needed to complete the current request. If thebank does not mint any new VFM 490, the customer's request is filled andthe process is complete. If the bank does in fact mint new VFM fromout-of-circulation tokens to in-circulation tokens, a third transfer 495is required. In this situation, the bank must transfer RWC from itsaccount 450 in an amount sufficient to satisfy the reserve requirementof the central authority/system for the amount of new VFM it minted. Thefunds are held in the bank's reserve account 498, the funds are whichare not available until such time as VFM is cleared from the system. Thereserves in account 498 are constantly adjusted as needed to ensure thereserve requirements are met as VFM is minted into the system by thebank, and cleared out of the system by the bank. To improve thefunctionality of the acquisition of VFM, any number of API's can beprovided to facilitate the various steps for the customer or the bank.Examples of such API's would include functions for requesting orapproving the request for VFM by a customer.

FIG. 5 depicts aspects of VFM acquisition (and redemption) by a non-bankfinancial institution (“NBFI). Generally the system is established withcentral authority and/or financial institutions that are qualified banksas the only parties with permission to mint out-of-circulation currencyto in-circulation currency. However, alternative financial servicescompanies that are not banks still participate extensively in thesystem. Accordingly, as shown in embodiment 500 in FIG. 5 , a NBFI 501having a VBA 510 in system and a regular bank account 520 can acquireVFM in several ways. After the VBA 510 is established, the NBFI 501 canpurchase VFM from a financial institution that is a bank, e.g. in themanner as described above for a customer in FIG. 4 . Thus a purchase ofVFM 540 can be made using RWC from the bank account 520. Purchased VFMwill be transferred/deposited in the NBFI VBA 510 as described above.Other methods that the NBFI can acquire VFM 550 include from its owncustomers (who would pay the NBFI 501 from the customer's VBA 560. TheNBFI 501 can also acquire VFM 550 through other VFM-based transactionswith other parties in the system having VFM (and in a VBA or otheraccount in the system). The financial institution that is bank can alsoclear or redeem VFM 530 for the NBFI 510. When any portion of the NBFI'sVFM is cleared through a bank FI 540, the proceeds can be deposited inthe NBFI bank account 520, and any VFM acquired 550 (e.g. purchased fromthe bank can be deposited into the NBFI VBA 510). This, while the NVFImay not have as complete permissions as a financial institution that isa bank, it can still participate extensively in the system and reap manyof the advantages the VFM system provides. As in FIG. 4 , the steps andprocesses involved for the NBFI can be facilitated by the use ofappropriate API's in the system.

FIG. 6 provides a flowchart of an embodiment 600 showing aspects of VFMredemption for non-financial institutions (e.g. vendors and merchants)within the system. A merchant or vendor 601, having a merchant/vendorVBA (virtual bank account) 610 requests redemption of all or any portionof the VFM 605 in the VBA 610. The redemption request 620 can beconveniently facilitated through a redemption API (not shown) and otherAPI functionality throughout the process. Financial institutions thatare banks receive the redemption request 620. A redeeming bank 630 isselected. On an embodiment where redemption is on a first minted/firstredeemed (i.e. first in/first out) basis, the redeeming bank 630 is e.g.the bank that minted majority of the oldest VFM 605 to which the requestis applicable. Using processes such as ACH and EFT, the redeeming bank630 transfer funds in the appropriate real world currency to thevendor/merchant's ‘real world’ bank account, in exchange for VFM 605.The redeeming bank 630 receives the VFM 605 into its own VBA 640 as VFM650 and can handle it as follow: VFM 650 can be (re)circulatedthroughout the system. Or, for that portion of VFM 650 originally mintedby the redeeming bank 630, the redeeming bank can clear the VFM 650 bytaking it from in-circulation and returning it to out-of-circulation,and simultaneously recovering the redeeming bank's 630 reserve funds 660from the bank's restricted reserve account 665. The remaining VFM 650originally minted by other bank FI's 675 can be (re)circulated or can beredeemed and cleared through the bank(s) 675 that originally minted theVFM 650, with each bank 675 responsible for redeeming and/or clearingthe VFM 650 that it originally minted in the same manner as redeemingbank 630 redeemed the VFM 650 it originally minted.

FIG. 7 provides a flowchart of an embodiment 700 showing aspects of VFMredemption for individuals, customers, and consumers within the system.A customer or consumer 701, having a VBA (virtual bank account) 710requests redemption of all or any portion of the VFM 705 in the VBA 710.As with merchants and vendors shown in FIG. 6 , the redemption request720 can be conveniently facilitated through a redemption API (not shown)and other API functionality throughout the process. One noticeabledifference is that a customer or consumer makes the redemption request720 directly to the customer's or consumer's own bank 730 with whom thecustomer or consumer has its VBA 710. The redeeming bank 730 is thusselected by the fact of being the customer's or consumer's banking FI inthe system. Unlike in the situation with merchants and vendors, theprocess is basically internal to the customer's or consumer's bank 730and thus does not require or utilize ACH. The redeeming bank 730transfer funds in the appropriate real world currency to thecustomer's/consumer's ‘real world’ bank account, in exchange for VFM705. The customer's/consumer's bank (i.e. the redeeming bank) 730receives the VFM 705 into its own VBA 740 as VFM 750. As above, theredeeming bank 730 now owns VFM 750 and can handle it as follow: VFM 750can be (re)circulated throughout the system. Or, for that portion of VFM750 originally minted by the redeeming bank 730, the redeeming bank 730can clear the VFM 750 by taking it from in-circulation and returning itto out-of-circulation, and simultaneously recovering the redeemingbank's 730 reserve funds 760 from the bank's restricted reserve account765. The remaining VFM 750 originally minted by other bank FI's 775 canalso be handled as above. I.e. VFM 750 not originally minted by the bankcan be (re)circulated or can be redeemed and cleared through the bank(s)775 that originally minted the VFM 750, with each bank 775 responsiblefor redeeming and/or clearing the VFM 750 that it originally minted inthe same manner as redeeming bank 730 redeemed the VFM 750 it originallyminted. For merchants and vendors the redeeming bank 630 is determinedbased on FI/FO principles and the amount each bank originally minted.For individuals (e.g. customers, consumers, nonbusiness accounts) eachbank 730 redeems VFM for its own customers or consumers.

FIG. 8 helps elucidate basic principles of clearing VFM among financialinstitutions in the system that are banks, showing an embodiment 800 offirst minted (oldest), first cleared approach to clearing VFM. As can beseen clearing functions are among banks, in analogous fashion toclearing of checks and the like in the real world. This a bank 801 canrequest clearing of VFM 805. A clearing request 888 is sent to allfinancial institutions in the system that are minting (qualified) banks.The requesting bank 801 must request its oldest (i.e. first in) VFM 805is cleared first and so on. The bank 899 that originally minted the VFM805 will approve the clearing request 888 and transfer real world fundsto the requesting bank 801. Clearing bank 888 will receive the VFM asbank's VFM 850 and can take it out of circulation by converting thein-circulation VFM 850, to out of circulation VFM 851 by setting the outof circulation key. Clearing bank 888 can also recover the reserves realworld funds 860 from its reserve account 765. Each qualified (minting)bank is only responsible for clearing VFM it originally minted.

III. Private Permissioned Blockchain Digital Fiat Currencies

In another aspect of this disclosure, blockchain digital currencies areprovided herein. These currencies, sometimes referred to herein asvirtual fiat money (VFM) differ from cryptocurrencies in severalrespects, and are similar to cryptocurrencies in other respects. Theyare similar to cryptocurrencies in utilizing the benefits of blockchainand related digital technology to provide security, authenticity, andtraceability/immutable ledger that make the currency reliable. Theydiffer from most other cryptocurrencies in that they are digitalrepresentations of real world currency and as such can be denominated inany real world currency. They are also different in they are created byfiat through a central authority rather than mined, are minted by banks,and preferably are backed by a fractional or a full reserve of the realworld currency in which they are denominated. These currencies alsodiffer in that they have no value or use outside of a private,permissioned network comprising financial institutions.

Generally, the digital fiat blockchain currencies comprise an electronictoken having a blockchain and at least one digital security feature toenhance security, traceability, authenticity, or a combination thereoffor that token. The blockchain provides an immutable ledger/trail ofaccountability and includes the entire history of each token from thetime it was created. The digital fiat currency is used within a privatesystem wherein all parties agree to participate and a central authorityinitially creates tokens that are out of circulation, and which havezero value.

While the currency is “out of circulation”, the blockchain comprises an“out-of-circulation” block comprising a plurality of the following data:

-   -   i) a real world currency ID key;    -   ii) a null issuing financial institute (FI) key;    -   iii) a null issue timestamp;    -   iv) a null party name ID;    -   v) a null party account ID;    -   vi) a null party ‘transfer to’ timestamp; and    -   vii) a value key equal to zero;

When the currency is digitally minted into circulation in the privatesystem, the blockchain is modified. Thus, when the currency is “incirculation” the blockchain comprises an out-of-circulation block andfurther includes an “in-circulation” block comprising a plurality of thefollowing data:

-   -   i) a real world currency ID key;    -   ii) an issuing financial institute (FI) key;    -   iii) an issue timestamp;    -   iv) a party name ID;    -   v) a party account ID;    -   vi) a party ‘transfer to’ timestamp; and    -   vii) a value key specifying the value of the token expressed as        the number of “minimal physical currency units” in circulation        for the corresponding real world currency; and

When the currency is “in circulation” in the system, the value indicatedin the quantity key corresponds to an amount of funds in real-worldcurrency which have been placed on reserve in the system by a bankhaving permission to put the digital currency into circulation in theprivate system. The private digital currency is created initially byfiat as out-of-circulation tokens, which cannot be mined or otherwisecreated.

The structure of the digital currency can be better understood withreference to the figures. FIG. 3 shows a schematic of the blockchaindigital fiat currency 300 in accordance herewith. Bothout-of-circulation tokens 301 and in-circulation tokens 399 generallycomprise blockchain 302. As can be seen, out-of-circulation tokens 301include a blockchain block 302 a comprising out-of-circulation key thatincludes sufficient data to show that the token is out-of-circulation,has no value, no owner, and such. The out-of-circulation token 301 isconverted to in-circulation digital currency 399 by appending block 302b to the blockchain 302. Block 302 b comprises an in-circulation datakey that includes data sufficient to establish that the token isin-circulation, the identity bank uniquely minted the currency, thecorresponding real world currency in which the in-circulation digitalcurrency is denominated, and the value of the in-circulation currency(expressed in units of the corresponding real world currency), and thecurrent owner of the token 399. The skilled artisan will appreciate thata timestamp corresponding to the date and time of minting thein-circulation currency is also included.

It should be noted that each subsequent event in connection with anyspecific in-circulation currency 399 is appended to the blockchain 302as blocks 302 c . . . through 302 x. Prior blocks on the blockchain areimmutable by any party. In addition to the data stored in the blockchainas described herein, additional data can include a party to whom thein-circulation digital currency was ‘transferred to’ and the date ofsuch transfer. In one embodiment, a future commitment to transfer, andthe party to whom it will be transferred can also stored in theblockchain. In some cases, such commitment may be conditional. Thelatter functions are useful in connection with e.g. contracts withrecurring payments, future payments obligations, financial guarantees orcontingencies, and the like.

Also provided herein in connection with the blockchain digital fiatcurrencies are private networks for peer-to-peer financial transactions.Such systems allow for financial transactions analogous to those withtraditional real world currencies in a virtual system using theblockchain digital fiat currencies provided herein. The private networksgenerally comprise a plurality of parties to the transaction, a uniqueelectronic document for each peer-to-peer financial transaction, aplurality of networked servers, and a payment module for paying anamount in the transaction upon authorization or approval.

The plurality of parties each have a unique identity within the network.Each party also has at least one virtual account in the private network,and each is provided a digital signing key unique to that party forauthorizing or approving peer-to-peer transactions.

The electronic document for each smart transaction has a uniqueidentifier for that transaction and comprises at least the core terms ofthe peer-to-peer financial transactions. The identities of each partyinvolved in the transaction are also contained in the electronicdocument.

The smart transaction document also comprises an authorization approvalsection for the document that requires use of the digital signing keyunique to a party authorizing the transaction. A timestamp correspondingto the time a party authorized the transaction is also a part of orappended to the document.

The plurality of networked servers comprises at least one distributeddatabase which provides electronic tokens representing the blockchaindigital currency in the network. The database may be distributed viapeer-to-peer connections or other useful connections allowing copies ofthe database to be shared with complete integrity among the users. Theservers also comprise a database having the electronic document for eachpeer-to-peer financial transaction. Such data may be in the same orseparate databases.

The payment module comprises such hardware and/or software as may berequired to confirm that a transaction has been authorized or approved,and to subsequently execute payment by transferring blockchain digitalcurrency from the payer, or by a third party payer, to an authorizedpayee. In one embodiment, the payment module includes computerinstructions capable of being executed on the network. The instructionsprovide for at least transferring a specified amount of blockchaindigital currency from the virtual account of a first party whoauthorizes a specified transaction, or a third party authorized by thefirst party who then authorizes the specified transaction, comprisingpayment of the specified amount of the blockchain digital currency tothe virtual account of a second party, upon authorization of thespecified transaction using the signing key;

Like the digital currency disclosed herein, the electronic document(s)for each peer-to-peer financial transaction comprise a blockchain ofdata that provides security, traceability, and an audit trail for eachtransaction.

Generally, if the authorization approval section for the electronicdocument for a transaction has been signed (i.e. authorized or approved)with the authorized key, the payment module is automatically andirrevocably executed. In one embodiment, the private network furthercomprises means for peer-to-peer data transfer as well as andpeer-to-peer value transfer, i.e. no intermediary (bank or financialinstitution or the like) is required to effect payment. Preferably, thedata transfer and the value transfer are substantially simultaneous.

The skilled artisan will appreciate that methods of conducting suchprivate transactions are readily developed using the blockchain digitalcurrency and the private network described above. Such privatetransactions can include virtually any transaction that can be conductedwith physical, real world currency and are faster, easier, fully-trustbased and payment is guaranteed upon authorization or approval or uponsatisfaction of a contingency in an electronic contract definingfinancial transaction such as upon a date specified. Such transactionscan range from payment of personal debts, including loans, IOUs,personal notes, or the like, payments for goods and services includingpersonal or professional service, and payment of invoices or the like.Some of those transactions can be conducted through the use of moreformal electronic payment methods and electronic contracts (‘smarttransactions”) as described below.

IV. Electronic “Smart” Transactions and Contracts for Use withBlockchain Digital Currency.

In another aspect of the present disclosure, electronic transactionpayments and electronic contracts are disclosed. These are referred toherein generally as ‘smart transactions’ and ‘smart contracts’, andpreferably involve and are built on the systems and digital currency,and methods for their use disclosed in the foregoing sections.

Methods of transacting payments using blockchain digital currency in aprivate permissioned financial system are provided. The methodsgenerally comprise the step of identifying a first party requesting apayment in blockchain digital currency in the system from a secondparty, and a second party determining whether to make a payment ofblockchain digital currency to the first party, or by authorizing athird party to make payment to the first party on behalf of the secondparty.

Because the methods are preferably practiced within the systemsdisclosed herein, such as those provided in Section I above, the firstand second parties are generally included within the system.Accordingly, each party generally holds at least one virtual account inthe system. Each party also has a unique identifier (‘ID’) within thesystem.

Each of the first and second parties must have permission to access thesmart transaction or smart contract. The second (paying) party must alsohave permission to digitally authorize or approve payment of smarttransaction or smart contract within the system. Preferably theauthorizing or approving parties are issued a digital signing key thatis unique to that party for authorizing or approving a payment ofdigital currency in the system.

After the parties are identified, assigned unique IDs, and provided witha digital signing key, electronic communications are established betweenthe first and second parties. The electronic communications can compriseany form of electronic communication within or without the system,provided that the parties can communicate regarding a payment of digitalcurrency within the system. Regardless of the particular means ofcommunication, preferably, the parties can share a resource locator,electronic link or the like that points to one or more documents ordatabase entries in the system.

The method further comprises the steps of communicating an invoiceand/or other transaction data (e.g. in the form of a smart transaction)from the first party detailing the specified amount of payment ofdigital currency requested, recording the transaction in a database inthe system, and receiving transaction by the second party.

The received transaction is subsequently processed by the second partywho can either approve the transaction, and authorize payment or rejectit. If approved for payment, the second party (i.e. the party approvingand authorizing/making payment) signs the transaction in the database(e.g. a smart transaction) with the digital signing key and therebyauthorizes payment, with the specified amount of digital currency fromits accounts.

The methods comprise the final steps of transferring the specifiedamount of blockchain digital currency from the appropriate virtualaccount (e.g. the account of the second party), to the virtual accountof the first party; and recording the details of the approval,authorization, and payment in the database.

In various embodiments, the database described above is distributedwithin the system via network of private servers, e.g. via peer-to-peerconnections or other useful connections.

The skilled artisan will appreciate that not every transaction will beapproved—for any of a variety of reasons. If the transaction is notapproved for the specified amount of payment it can be rejected in wholeor part, disputed in whole or part, or approved for a different amountof payment. In one embodiment the original or an additional party can berequested to pay for another part of the remaining balance.

In a presently preferred embodiment, the smart transaction comprises ablockchain, which can be used to record the approval and subsequentpayment in connection therewith. The blockchain preferably includes atleast one block comprising data sufficient to detail the identities ofthe parties, each party's virtual account(s), the amount of thetransaction, the date of the transaction, the approval or paymentauthorization status, the date of payment authorization, and the uniqueidentity of the digital currency in connection therewith. The use ofsuch blockchains allows the parties to readily review and audit thepayment transactions.

In a further embodiment of the method for payment transactions, themethods involve a complete ‘smart contract’ approach includingelectronic offers, counteroffers, and acceptance, with subsequent smarttransaction billing or invoicing as described above. Such smart contractcan comprise obligations on the part of both parties that are eitheraccomplished within or without the system, and such obligations cancomprise obligations that can be accomplished digitally (e.g. providingan online service such as cybersecurity, server hosting, email services,etc.) or obligations that can only be completed in the physical world(e.g. sale a physical goods, or providing services in the physicalworld). Such methods further comprising, prior to the step ofcommunicating an invoice or other equivalent request for paymenttransaction, the step of:

creating a proposed electronic transaction detailing a proposedtransaction between the parties comprising:

-   -   1) providing an offer by one party (the offering party) to the        other, said offer comprising:        -   i) one or more unique identifiers that specifically identify            the digital smart transaction within the private system;        -   ii) at least the core obligations of the parties, including            payment obligations and terms thereof;        -   iii) a blockchain comprising data that initially details at            least the identity of each of the parties, the unique            identifier of the electronic transaction, and the terms of            the offer, including the specified amount(s) of any            payment(s) of digital currency; and        -   iv) the digital signature of the offering party using the            signing key unique to the offering party.

The foregoing substantially constitutes an electronic process of makingan offer capable of being accepted to form a legal contract. As with anysuch offer, it can be accepted, rejected, or countered (i.e., rejectedwith a new offer). Accordingly the methods for forming a smarttransaction in the system further comprise the subsequent step of

-   -   2) allowing the other prospective party to the transaction to        accept the offer with the digital signing key to form an        executed electronic transaction, reject the offer, or to counter        with a digital counteroffer; and optionally allowing the        prospective party to transfer a full or partial payment of the        amount via an authorized third party.

If an executed electronic contract (e.g. a smart transaction) is formed,a block is appended to the blockchain of the executed electronictransaction comprising data sufficient to detail the time the digitaloffer was accepted; the specific electronic token(s) or a portionthereof, corresponding to the blockchain digital currency committed tothe payment obligations of the electronic transaction in an amountsufficient to the payment obligations under the contract; and at leastone virtual account in the system comprising said tokens; and theexecuted electronic transaction is recorded in the database with thedigital signature of the parties thereto. Such contracts are legallyenforceable. Moreover all terms of performance of the parties may bedetailed in the electronic transaction. Further, dispute resolutionoptions may be specified—including dispute resolution within the system.Policies such as refund policies, as well as guarantees or the lackthereof may be specified in the electronic transaction and may bereadily enforced within the system. Such contracts are powerful in theirease of use, security, degree of trust, assured payment uponsatisfactory completion, readily available audit trail, and provide allof the advantages of digital currency, and all of the advantages ofblockchain technology, while offering low transaction costs and easyinternational transaction options.

In one embodiment, the smart transaction can provide for e.g. recurringpayments, subscription models, down payments, seller/vendor/merchantfinancing with or without interest, interest free periods followed byinterest accumulation, refunds, discounts and coupons, repeatcustomer/loyalty rewards, and more.

If the offer above is not accepted, but a counteroffer is made, theabove steps and creating and making the offer are repeated with thecounteroffer constituting the new ‘offer’. The process is repeated untila smart transaction is formed, or until the offer is rejected and nofurther counteroffer is pending. If the original offer or any subsequentoffer (i.e. counteroffer) is rejected and no additional counteroffer ispending, the proposed transaction is disregarded. For simple invoices(such as a vendor invoice) and merchant transactions which are paidshort of their requested amount, the vendor or merchant can terminatethe contract by either accepting the short payment and writing off thebalance, re-submit a new invoice or transaction request, or ask therequested party to make an additional payment against the original shortpaid transaction.

The skilled artisan will appreciate the step of distributing thedatabase comprising executed smart transactions is particular useful forallowing the parties to ensure the security of the smart transactions,as to review and audit the documents and have access to the details ofsuch contracts by all parties related to each transaction. In additionto the electronic contracts themselves, in certain embodiments, thesmart transactions can comprise other digital data such as standardizedor self described EDI, ACH, ISO, XML, JSON, and other data formats thattrading partner peers agreed to exchange with each other. The smarttransactions can also include optional photographs, scanned documents,spreadsheets, and/or other electronic document attachments that may beuseful to the parties to the contract, or to facilitate or improve thefunctioning of the system.

The methods of transacting payments as well as those involving moredetailed ‘smart transactions can arise out of any transaction oragreement—including a consumer-to-consumer transaction, aconsumer-to-business transaction, a business-to-consumer transaction, abusiness-to-business transaction, or the like.

In one embodiment, the methods of using the smart transactions furthercomprise the step of appending, upon each subsequent event regarding theexecuted smart transactions, to the blockchain of the smart transactionsat least one block comprising data detailing the subsequent event.Subsequent events might include events between the parties, or eventssuch as the reporting of the failure of product or service, reviews ofthe performance of the various parties, or the like. Some suchinformation may be restricted to the parties to the smart transaction,while others might be available to other members of the private system,such as financial institutions, or vendors and merchants, or otherconsumers. In some cases certain parties who were not party to the smarttransaction may have permission to view the subsequent information,without reviewing all of the information in the underlying smarttransaction. For example, in certain embodiments the price and other keyterms may be only accessible to the parties to the executed smarttransaction.

In one embodiment of implementing smart transactions, the step ofcommunicating an invoice, occurs upon maturation of the paymentobligations. The invoice can be automatically sent on maturation,triggered for example by a particular date, or by completion of one ormore performance-related obligations. An invoice in the system couldalso be automatically triggered based on a milestone obligation in asmart transaction.

Upon completion of all obligations under the smart transaction ortransaction, the blockchain of the smart transaction is appended with ablock comprising data sufficient to indicate that all obligations,including the payment obligations, under the contract or smarttransaction have been completed. Completion of all obligations under acontract or smart transaction may be viewable by other parties in thesystem—for example creditors and lenders may wish to be notified when aparty's payment obligations to another party are completed.

In one embodiment, the methods further comprise incorporating at leastone electronic security feature that allows the contents and theintegrity of the executed smart transaction to be independently verifiedallowing parties to confirm the integrity of contents of the contract orsmart transaction. Encrypting the executed contract or transaction witha public key such that only private key holders can decrypt the contractor smart transaction is a useful step in certain embodiments.

The scope of the invention is set forth in the claims appended hereto,subject, for example, to the limits of language. Although specific termsare employed to describe the invention, those terms are used in ageneric and descriptive sense and not for purposes of limitation.Moreover, while certain presently preferred embodiments of the claimedinvention have been described herein, those skilled in the art willappreciate that such embodiments are provided by way of example only. Inview of the teachings provided herein, certain variations,modifications, and substitutions will occur to those skilled in the art.It is therefore to be understood that the invention may be practicedotherwise than as specifically described, and such ways of practicingthe invention are either within the scope of the claims, or equivalentto that which is claimed, and do not depart from the scope and spirit ofthe invention as claimed.

What is claimed is:
 1. A system for using private permissionedblockchain digital fiat currency in conjunction with real world currencycomprising: A) a plurality of private servers, each comprising: 1)non-volatile computer memory storing: a) one or more distributeddatabases comprising: i) at least one blockchain comprising a pluralityof blocks;  a) a plurality of such blocks representing blockchaindigital currency that is out of circulation in the system(“out-of-circulation blocks”), each such block comprisingout-of-circulation data comprising a plurality of the following:  1) Areal world currency ID key;  2) A null issuing financial institute (FI)key;  3) A null issue timestamp;  4) A null party name ID;  5) A nullparty account ID;  6) A null party ‘transfer to’ timestamp; and  7) Avalue key equal to zero;  and one or more unique digital securityfeatures on each out-of-circulation block to provide security andtraceability, and to ensure authenticity for that block; and  b) afurther plurality of such blocks representing blockchain digital fiatcurrency that is in circulation in the system (“in-circulation digitalcurrency”), each such block comprising an out-of-circulation block andfurther comprising “in-circulation” data, such in-circulation datacomprising a plurality of the following:  1) a real world currency IDkey;  2) an issuing financial institute (FI) key;  3) an issuetimestamp;  4) a party name ID;  5) a party account ID;  9) a party‘transfer to’ timestamp; and  6) a value key specifying the value of theblock expressed as the number of “minimal physical currency units” incirculation for a corresponding real world currency; and b) computerreadable instructions for: creating the out-of-circulation blocks;creating and implementing digital security features on theout-of-circulation blocks; establishing permissions for parties to thesystem to access the out-of-circulation blocks; creating and issuingpublic/private mint key pairs, and public/private decryption key pairsto parties in accordance with their permissions in the system; digitalminting of in-circulation digital currency from out-of-circulationblocks by appending in-circulation data thereto; limiting access to theblockchains comprising out-of-circulation blocks to public/private mintkey holders with permissions to append in-circulation data to theblockchain to digitally mint in-circulation digital currency; limitingaccess to the blockchains comprising in-circulation digital currency topublic/private decryption key holders with sufficient permissions toappend new data on said blockchains; accurately storing each blockchainso modified in the databases; and creating and storing a uniquetimestamp corresponding to each such blockchain modification; and c) aplurality of public/private mint key pairs each of which allows apermissioned party to digitally mint in-circulation digital currency bymodifying blockchain comprising out-of-circulation blocks by appendingin-circulation data thereto notwithstanding the unique digital securityfeatures thereon; and 2) one or more processors capable of executing thecomputer readable instructions; and B) a network comprising connectionsbetween the private servers including means for distributing thedatabases between the servers comprising private peer-to-peerconnections, or other private permissioned connections, or an electronicportal for accessing said databases; such that the out-of-circulationblocks and the in-circulation digital currency blocks are accessible topermissioned parties.
 2. The system of claim 1 wherein the computerreadable instructions further comprise instructions for determiningrequirements for reserved funds in real world currency to be provided bya qualified bank in proportion to the amount of in-circulation digitalcurrency that is digitally minted by the bank from out-of-circulationblocks.
 3. The system of claim 1 wherein the nonvolatile memory furtherstores a plurality of virtual bank accounts, virtual credit accounts,and virtual foreign exchange accounts; wherein each such account isassociated with a party who is a specific account holder that is a) abank or non-bank financial institution; b) a customer or consumer; c) avendor, a merchant, a lender, or a borrower; or d) any combinationthereof; and wherein each account holder has at least one account thatis a virtual bank account, a virtual credit account, or a virtualforeign exchange account.
 4. The system of claim 3 wherein one or moreof the private servers on the network further comprises computerreadable instructions for one or more of the following: a) acquiringin-circulation digital currency in exchange for real world currency ortraditional electronic funds denominated in real world currency; b)redeeming in-circulation digital currency in exchange for real worldcurrency or traditional electronic funds denominated in real worldcurrency and subsequent removal of in-circulation digital currency fromcirculation; c) clearing in-circulation digital currency in exchange forreal world currency or traditional electronic funds denominated in realworld currency, and optionally, subsequently removing in-circulationdigital currency from circulation; d) peer-to-peer payments between anytwo or more parties using the system; e) peer-to-peer electroniccontracts and data exchange between any two or more parties using thesystem; and f) vendor invoicing via peer-to-peer electronic contracts,data exchange, and payments between a vendor and one or more partiesusing the system; g) transferring in-circulation digital currency fromparty to party; h) transferring in-circulation digital currency betweenaccounts of the same party; i) managing keys and permissions granted toparties using the system; and j) splitting blocks corresponding toin-circulation digital currency.
 5. The system of claim 4 whereincomputer readable instructions comprise code, subroutines, and protocolsconstituting an application program interface (API).
 6. The system ofclaim 4 further comprising a transactions database that compriseselectronic transaction data defining transactions between partiesinvolving in-circulation digital currency, and which tracks transactiondetails and provides an audit trail of the transaction and thein-circulation digital currency in connection therewith.
 7. The systemof claim 6 further comprising sufficient network connections to provideaccess to the transactions database to parties to said electronictransactions where such parties have access permission.
 8. The system ofclaim 4 wherein the computer readable instructions for splitting blockscomprising in-circulation digital currency further comprise instructionsallowing creating a child block from a block (“parent block”) comprisingin-circulation digital currency by: providing the child block withsufficient data from the parent block to link the parent and childblocks in the system and provide traceability and an audit trail inconnection therewith; transferring and assigning to the child block aportion of the value of the parent block; and recording on theblockchain comprising the parent block data sufficient to establish theexistence of the child block, to link the parent block and the childblock, and to revise the value of the parent block to reflect the valuetransferred and assigned to the child block.
 9. The system of claim 1wherein financial institutions are compensated through transaction,subscription, and other banking and financial service fees and notthrough fees for mining or creating blockchain digital currency.
 10. Amethod for implementing and using a private permissioned blockchaindigital fiat currency comprising the steps of: a) providing a pluralityof private servers, each comprising: 1) Non-volatile computer memorystoring: i) one or more distributed databases comprising: (a) at leastone blockchain comprising a plurality of blocks;  i) a plurality of suchblocks representing blockchain digital currency that is out ofcirculation in the system (“out-of-circulation block”), each such blockcomprising “out-of-circulation” data comprising a plurality of thefollowing:  1) a real world currency ID key;  2) a null issuingfinancial institute (FI) key;  3) a null issue timestamp;  4) a nullparty name ID;  5) a null party account ID;  6) a null party ‘transferto’ timestamp; and  7) a value key equal to zero; and one or more uniquedigital security features generated for each out-of-circulation block toprovide security and traceability, and to ensure authenticity for thatblock; and ii) a further plurality of such blocks representingblockchain digital fiat currency that is in circulation in the system(“in-circulation digital currency”), each such block comprising anout-of-circulation block and further comprising “in-circulation” data,such in-circulation data comprising a plurality of the following: 1) areal world currency ID key; 2) an issuing financial institute (FI) key;3) an issue timestamp; 4) a party name ID; 5) a party account ID; 6) aparty ‘transfer to’ timestamp; and 7) a value key specifying the valueof the block expressed as the number of “minimal physical currencyunits” in circulation for a corresponding real world currency; and Ii)computer readable instructions for: creating the out-of-circulationblocks; creating and implementing digital security features on theout-of-circulation blocks; establishing permissions for parties to thesystem to access the out-of-circulation blocks; and creating and issuingpublic/private mint key pairs and public/private decryption key pairs toparties in accordance with their permissions in the system; digitalminting of in-circulation digital currency from out-of-circulationblocks by appending in-circulation data thereto; limiting access to theblockchains comprising out-of-circulation blocks to public/private mintkey holders with permissions to append in-circulation data to theblockchain to digitally mint in-circulation digital currency; limitingaccess to the blockchains comprising in-circulation digital currency topublic/private decryption key holders with sufficient permissions toappend new data on said blockchains; accurately storing each blockchainso modified in the databases; and creating and storing a uniquetimestamp corresponding to each such blockchain modification; and 2) oneor more processors capable of executing the computer readableinstructions; b) establishing a network among the private servers; c)creating connections between the private servers on the network,including means for distributing the databases between the servers, saidconnections comprising private peer-to-peer connections, or otherprivate permissioned connections, or an electronic portal for accessingsaid databases; such that the out-of-circulation blocks andin-circulation digital currency are accessible only to permissionedparties; d) generating a unique public/private mint key pair that allowsa permissioned party to digitally mint in-circulation digital currencyby modifying the blockchain corresponding to out-of-circulation blocksby appending in-circulation data thereto notwithstanding the uniquedigital security features thereon; e) for each permissioned partyelecting to digitally mint an amount of in-circulation digitalcurrency: 1) digitally minting the amount of in-circulation digitalcurrency by modifying the blockchain comprising one or moreout-of-circulation blocks by appending thereto “in-circulation” data anddetermining an amount of real world funds to be reserved based on theamount digitally minted, and 2) repeating step e(1) each time an amountof in-circulation digital currency is minted; f) allowing a permissionedparty-to use the in-circulation digital currency in one or moretransactions in the private system; and g) recording the details of thetransactions in the blockchain comprising the in-circulation currency.11. The method of claim 10 further comprising the step of establishingone or more virtual bank accounts, virtual credit accounts, and virtualforeign exchange accounts with one or more financial institutions;wherein each such account is associated with a party who is a specificaccount holder that is a) a bank or nonbank financial institution; b) acustomer or consumer; c) a vendor, a merchant, a lender, or a borrower;or d) any combination thereof; and wherein each account holder has atleast one account that is a virtual bank account, a virtual creditaccount, or a virtual foreign exchange account.
 12. The method of claim10 further comprising the step of providing computer readableinstructions stored in the non-volatile memory for one or more of thefollowing functions: a) acquiring in-circulation digital currency inexchange for real world currency or traditional electronic fundsdenominated in real world currency; b) redeeming in-circulation digitalcurrency in exchange for real world currency or traditional electronicfunds denominated in real world currency and subsequent removal ofin-circulation digital currency from circulation; c) clearing ofin-circulation digital currency in exchange for real world currency ortraditional electronic funds denominated in real world currency andoptionally, subsequently removing in-circulation digital currency fromcirculation; d) peer-to-peer payments between any two or more partiesusing the system; e) peer-to-peer electronic contracts and data exchangebetween any two or more parties using the system; and f) vendorinvoicing via peer-to-peer electronic contracts, data exchange, andpayments between a vendor and one or more parties using the system; g)transferring in-circulation digital currency from party to party; h)transferring in-circulation digital currency between accounts of thesame party; i) management of keys and permissions granted to partiesusing the system; and j) splitting blocks corresponding toin-circulation digital currency.
 13. The method of claim 10 wherein theone or more distributed databases further comprise a transactiondatabase that comprises electronic transaction[s] data definingtransactions between parties involving in-circulation digital currencyand which tracks the transaction details and provides an audit trail ofthe transaction and the in-circulation digital currency in connectiontherewith.
 14. The method of claim 10 wherein the one or more uniquedigital security features involve a public key encryption step thatrequires a private key to decrypt said features and access theblockchain comprising a block.
 15. The method of claim 10 furthercomprising the step of utilizing the in-circulation digital currency inthe system in a first-minted, first-utilized manner wherein the issuetimestamp comprises data for determining which in-circulation digitalcurrency was first-minted.
 16. The method of claim 15 further comprisingthe steps of: splitting, where useful or required, the value representedby a block corresponding to in-circulation digital currency (“parentblock”) to create a child block; providing the child block withsufficient data from the parent block to link the parent and childblocks in the system and provide traceability and an audit trail inconnection therewith; transferring and assigning to the child block aportion of the value of the parent block; and recording on theblockchain comprising the parent block data sufficient to establish theexistence of the child block, to link the parent block and the childblock; and to revise the value of the parent block to reflect the valuetransferred to the child block.
 17. The method of claim 16 wherein thesteps in connection with splitting a block require permissions onlyavailable to financial institutions.
 18. The method of claim 10 whereinthe allowing step further comprises transactions comprising peer-to-peerdata transfer and peer-to-peer value transfer.